Sechin Sees $3-$5 billion Synergies in Rosneft Takeover of TNK-BP

Rosneft’s CEO Igor Sechin said its planned $55 billion takeover of rival oil company TNK-BP would yield $3-$5 billion in synergies, largely on projects in new provinces in Russia’s north and east.

Sechin, speaking on a conference call a day after Rosneft announced it would buy British major BP  and its billionaire partners out of Russia’s No. 3 oil producer, said combined operations in East Siberia and the Arctic Yamal regions would provide an immediate gain on costs.

However, shares in TNK-BP’s listed unit slumped by more than 11 percent after Sechin said there had been no discussion on a buyout of minority shareholders. TNK-BP Holding  has a free float of around 5 percent.

“This question has not been discussed,” Sechin said. “We have not taken on any obligations … nobody proposed this to us.”

Sechin said Rosneft could optimize its exports to China by shipping crude from the TNK-BP-operated Verkhnechonskoye field in East Siberia, which is far closer to the Chinese border than Rosneft’s Vankor field, the current source of the barrels.

“We believe that the overall synergy effect from optimization of current upstream, refining and marketing projects can be calculated at $3-$5 billion,” Sechin told a conference call.

Rosneft could also extract synergies by using the infrastructure which serves Vankor, on the Arctic circle, with TNK-BP’s Arctic fields in the Yamal province to bring new barrels to market.

“We are already in talks with the TNK-BP leadership on using Rosneft’s infrastructure at Vankor to transport oil from (TNK-BP’S oilfields) Suzun and Tagul,” Sechin said.

“This will allow us to bring an additional 6 million metric tonnes (6.61 million tons) of oil to market (per year) without addition transport costs.”

He said Rosneft, facing an increase in debt to finance the buyout at a time when the company has high capital costs on new oil upstream projects and refinery upgrades, would sustain dividend payouts at 25 percent of net profit but not increase them.

“The increase in debt levels is in no way connected to dividend payments.”

BP reaped $19 billion in dividends in nine years as a partner in TNK-BP, a level unlikely to be matched by its equity holding in Rosneft, which will ultimately be nearly 20 percent.

(Reporting by Melissa Akin and Olesya Astakhova; Editing by Douglas Busvine)