Nizhnekamskneftekhim to Sell Refining Assets for $120 Million

OAO Nizhnekamskneftekhim, the largest refinery in Russia's Tatarstan region, will sell some of its crude- processing assets for at least 3.4 billion rubles ($119 million) because the Tatarstan government plans to build a new refinery.

Nizhnekamskneftekhim's board agreed Aug. 4 to call a shareholder meeting Sept. 19 to approve the sale of the medium oil distillates hydro-cleaning unit, the company said today in an e- mailed statement. The unit, which is also owned by OAO Tatneft (TATN), will be sold to TAIF-NK, Nizhnekamskneftekhim said.

Tatneft, the largest oil producer in Tatarstan, said July 26 it will build a new crude oil refinery, which may cost at least $1.8 billion, after the company failed to agree on the ownership of the OAO Nizhnekamsk Oil Refinery it's been building since 1999. The oil company will cooperate in the new refinery project with Tatarstan-owned OAO Svyazinvestneftekhim, which holds 33.6 percent of Tatneft.

Tatneft had spent 8.4 billion rubles ($292 million) on construction of the Nizhnekamsk refinery as of Jan. 1. Its ownership of the Nizhnekamsk refinery was challenged in court by its partner, OAO Tataro-American Investments and Finance, or TAIF. TAIF ``is affiliated with Tatarstan,'' Tatneft said in its 2003 earnings report, released July 14.

Tatneft, which produces most of its oil in Tatarstan, said in its 2003 earnings report the local government has ``considerable influence'' over its operations. Tatneft is Russia's sixth-largest oil producer.

South Korea's LG International Corp. (001120) last year began designing the unit, which will be based in the Russian region of Tatarstan, Tatneft said in July earnings report.

The planned new refinery would be the third in Tatarstan, which produced 616,000 barrels of oil a day in July. Of the total, Tatneft pumped 506,000 barrels a day, the company said on Aug. 9.

The new refining complex will be able to refine 7 million tons of crude a year (140,000 barrels a day), Tatneft said July 26. It will be able to process 3.5 million tons of crude to make high- grade fuel and will also have a petrochemical unit with a capacity of 900,000 tons a year. The project will be completed in 2010, the company said.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Tim Coulter at tcoulter@bloomberg.net

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