Russia’s TNK-BP pulls out of key Romanian privatization

Bucharest (Reuters) – Russian oil giant TNK-BP pulled out of the contest for Romania’s national oil firm SNP Petrom yesterday, leaving US firm Conoco Phillips and Italy’s ENI in the ring with regional competitors. Petrom’s privatization, scheduled for completion in March 2004, is seen as a test case of post-communist Romania’s willingness to let go of strategic assets and is a key element in the country’s accords with international lenders. TNK-BP, Russia’s third largest oil firm half-owned by oil giant BP, was one of the 11 companies short-listed by the government and invited to submit non-binding bids for the Petrom sale, estimated by analysts to be worth $1.0 billion. «We’ve got a letter saying they pulled out from the Petrom sell-off,» Economy Minister Dan Popescu told reporters. «TNK-BP withdrew before they got access to the company data.» He did not elaborate on the reasons for the move. The government, which owns around 93 percent of Romania’s leading oil firm, plans to sell 33.34 percent to an investor who would at the same time have to buy newly issued shares to raise its stake to 51 percent. Petrom’s sale is expected to speed up consolidation of the fragmented oil sector in Central Europe, where Hungary’s MOL, Austria’s OMV and Poland’s PKN have been battling for supremacy and are keen to limit the presence of big Russian players in their traditional markets. «One of the opponents with stronger financial background has retreated,» said Erste Bank oil analyst Tamas Pletser. «Probably the Central and Eastern European companies (on the short list) will form a consortium, because 51 percent in Petrom is a big chunk.» Companies seen joining forces The remaining bidders are US firms Occidental Oil and Gas, Alon Inc and ConocoPhilips, Italy’s ENI, Greece’s Hellenic Petroleum, Switzerland’s Glencore, Russia’s Gazprom, Austria’s OMV, Hungary’s MOL and Poland’s PKN. Among those likely to join forces, say analysts, are PKN and MOL. Officials from Hellenic Petroleum said the company would participate in the privatization only as part of a consortium. Regional players will have to compete mainly with ConocoPhilips, the third largest group in the US, and Italy’s ENI, which are both interested in Petrom’s oil extraction operations, analysts said. Petrom, with a work force of over 60,000, has both upstream operations – drilling 6 million tons of crude and 6.1 billion cubic meters of natural gas per year – and downstream operations, such as refining and retail sales. «It is a promising, but risky investment,» one analyst with a Western bank said, referring to the need to restructure the work force and to invest in upgrading Petrom’s two refineries to bring them in line with European Union standards. The deadline for non-binding bids is November 21, while binding bids must be submitted by January 31, 2004. Petrom’s nine-month net profit fell to 1.2 trillion lei ($34.99 million) in the first nine months of this year from 1.48 trillion in the same 2002 period, Bucharest bourse data showed.