Russia Says May Begin Selling Stake in Transneft Next Year

Russia may begin selling a stake in OAO Transneft, a pipeline operator that ships more than 90 percent of the country’s oil, from next year after President Dmitry Medvedev ordered the state to speed up asset disposals.

The government will cut its holding to 75 percent from all of the ordinary shares currently, First Deputy Prime Minister Igor Shuvalov’s office said in an e-mailed statement today.

The decision flies in the face of opposition from the Moscow-based company’s management, which says a sale would hinder its ability to borrow for projects. Transneft President Nikolai Tokarev in September called privatization “the worst thing” that could happen to the company.

The company would be forced immediately to repay about $4 billion in eurobonds and may see a downgrade in its credit rating should state ownership fall below 75 percent, he said.

Transneft is building the first oil pipeline linking Siberia to the Pacific coast, as well as a pipeline to bypass Belarus. The company estimates the cost of projects being built at $34.3 billion, it said today in a statement on its website.

The first link for the ESPO pipeline carrying oil to Asia may cost 389 billion rubles ($14 billion), it said. The second link extending the pipe to the Pacific Ocean may cost 327 billion rubles, the company added.

Baltic Pipeline System-2, a link allowing oil to bypass Belarus on its way to European markets, may cost 100 billion rubles by completion, Transneft said. The line will probably be ready to pump oil in October, spokesman Igor Dyomin said Aug. 1.

Medvedev ordered the government, in a speech in June, to improve Russia’s investment climate by boosting asset sales.

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

To contact the editor responsible for this story: Alex Nicholson at anicholson6@bloomberg.net

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