Tatneft May Delay New Refinery on Financing Woes, Analysts Say

OAO Tatneft's Taneco unit, planning Russia's first new refinery since the fall of the Soviet Union, may have its funding delayed because of financial market turmoil, analysts said.

The final $3 billion that Taneco needs by the end of the year would be a ``fantastic'' amount of money to raise in this financial environment, Alfa Bank oil analyst Konstantin Batunin said today by telephone. Acquiring such funding, while possible, would be ``risky,'' he added.

Energy companies from Russia to the U.S. are suffering as an unprecedented seizure in global bank lending fuels concern that operators of new projects will have to pay more for financing than planned.

The 140,000-barrel-a-day refining project in Nizhnekamsk in Tatarstan ``remains secure'' and on schedule for completion by early 2011, Tatneft (TATN)'s Head of Investor Relations Vladlen Voskoboinikov said today by phone from Moscow. Taneco is studying options for funding the venture by the end of this year, he said.

``All interested parties have indicated that we will be able to adhere to the timeframe; the project is not going to stop,'' according to Voskoboinikov.

Taneco will require $1.2 billion for capital expenditure on the refinery next year, Renaissance Capital analyst Evgenia Dyshlyuk said. It may have ``some difficulty'' raising the whole $3 billion, Dyshlyuk said, adding that banks may be more willing to lend because Tatneft is controlled by the Russian state.

Credit Facility

Tatneft already has a $2 billion credit facility from BNP Paribas SA for the refinery, available for 25 months, the Almetyevsk-based company said in December. The loans have an interest rate of 1.65 percent more than the London Interbank Offer Rate, it said.

The oil company has also received a 16.5 billion-ruble ($630 million) grant for pipeline, road and rail construction from the Russian government.

Tatneft owns 40 percent of Taneco directly. The International Petroleum Growth Fund, which is 42 percent controlled by Tatneft, owns 51 percent. Szyazinvestneftekhim, controlled by the Tatarstan region, holds the remaining 9 percent.

All shareholders have met their investment commitments so far, Voskoboinikov said.

To contact the reporter on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net

To contact the editor responsible for this story: Guy Collins at guycollins@bloomberg.net

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