Russia Expands Control Over Oil Pipeline Monopoly

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By Zainab Calcuttawala, Oilprice.com

A Transneft share swap could give the Russian sovereign wealth fund more control over the oil pipeline monopoly, according to a new report by Reuters.

The Russian government already owns 78.1 percent of the company, all of which are ordinary shares. The rest of the company consists of preferred shares, which are traded by smaller investors. The Russian Direct Investment Fund bought shares from United Capital Partners earlier this year after the latter group decided to liquidate a portion of its assets.

RDIF directly owned 0.43 percent of preferred shares after the UCP purchase, while the RDIF’s joint investment venture with China owns an additional 1.49 percent, Gazprombank told Reuters.

“We see a chance to significantly increase the exposure – our partners from Asia and the Middle East are interested in this,” RDIF head Kirill Dmitriev said in a telephone interview, without adding where the fund plans to buy the new shares.

The Gazprombank group and a special wing of Transneft own 53.6 percent of the pipeline company. Dmitriev now has plans to get the Russian government to convert all of Transneft’s preferred shares into ordinary ones.

“This would allow shareholders to more actively take part in the company’s business while the state would retain the control, holding 78 percent (in the capital after conversion),” he said.

Low oil prices and administrative opposition have long delayed plans to privatize Transneft. Moscow has been working with the Organization of Petroleum Exporting Countries (OPEC) to raise oil price by making a concerted effort to lower production from some the world’s largest producers.

Oil producers in Russia and Saudi Arabia are pushing to extend the Organization of Petroleum Exporting Countries’ (OPEC) production cuts until June of next year, according to a new report by The Wall Street Journal. The deal, which lowers the bloc’s output by 1.2 million barrels per day, is already set to extend until March 2018.

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