Tyumen Oil: Getting Primed for the Majors

Magic marker in hand, Tyumen Oil Co. President and CEO Simon G. Kukes is at his customary station: a white plastic drawing board. It's a routine Tuesday morning staff meeting in late May, but Kukes is trying to squeeze in a lesson in management. As a veteran oilman with 17 years of experience at U.S.-based Phillips Petroleum Co. and Amoco, Kukes has plenty to teach the junior executives of a Siberian company still steeped in Soviet-style practices. He chides one deputy for complaining about a lack of financing for a pipeline order without knowing precisely how much money is required to complete the purchase. Don't just bring us a problem, Kukes instructs the increasingly red-faced fellow--arrive with a solution. Asked later about the episode, Kukes, 54, acknowledges his patience has limits: "Sometimes I want to take a chair and hit a guy."

Kukes is going to have to check that impulse, because it looks like a tough job is about to get a lot more demanding. Tyumen's owners, a private group of investors led by Moscow-based Alfa Group, are committed to rapid growth. Their strategy is to boost the market capitalization of the company through acquisitions and good management, then sell it off to a Western oil major in three to five years. So last October, Tyumen's backers plunked down $1.08 billion for control of formerly state-controlled energy company Onako, a move that made Tyumen Russia's fourth-largest oil producer. Now, in a bid to push Tyumen to No. 3, the owners are negotiating for a controlling stake in another Russian oil giant, Sidanco Oil Co. "We want to create a really big company," says Alfa Group Chairman Mikhail M. Fridman, who believes investors will pay a premium for added production capacity.