Bloomberg: Billionaire Vekselberg to Revive Soviet Oil Plant to Save Town

Bloomberg: Billionaire Vekselberg to Revive Soviet Oil Plant to Save Town

May 26 (Bloomberg) -- Russian billionaire Viktor Vekselberg plans to renovate a money-losing, Soviet-era synthetic oil plant as President Dmitry Medvedev demands the rich invest in towns left impoverished by dying industries.

Vekselberg’s Renova Group is set to bid for the state’s stake in the factory at Slantsy near Prime Minister Vladimir Putin’s hometown of St. Petersburg, said Yakov Tesis, the holding company’s director for the project. Russia’s 16th richest man would spend $40 million immediately to get the plant producing oil again, Tesis said.

Russia’s billionaires doubled in number last year, while unemployment rose as high as 9.4 percent and the economy shrank the most since 1991. Political leaders are pushing the wealthy to invest in what are known as “mono-cities” from the Stalin- era, where a single company would provide most of the jobs and housing and fund schools. Such struggling towns are home to about 12 percent of Russia’s 142 million people, according to the Independent Institute for Social Policy.

“Today this asset is loss-making, there are thousands of people there, and entering this project, you take on serious social responsibilities,” Tesis said in an interview. “You can’t just get out of it.”

The government’s offer of state assets to private industry will be “hard to refuse” politically, said Natalya Zubarevich, head of regional studies at the Moscow-based institute.

State Sale

Renova owns 40 percent of the Zavod Slantsy plant, which was built to produce a petroleum-like fuel from shale rock containing oil. Renova has mines near St. Petersburg that contain oil shale and plans to buy the state’s 56 percent stake in the factory. The government will auction its share on May 31, according to the Federal Property Agency’s website.

Putin publicly berated Oleg Deripaska and other business owners in Pikalyovo, a town of 23,000 near St. Petersburg, in June last year for “lack of professionalism and perhaps simply greed” after idled factories and wage arrears sparked protests.

Russia will spend 27 billion rubles ($878 million) this year to support single-company towns, Putin said at a government meeting in Moscow on May 20.

While the Zavod Slantsy plant is the only hope for the town’s economy, the potential for “innovation and efficiency” sparked Vekselberg’s interest, Tesis said. Renova aims to upgrade the plant and produce synthetic fuel that can compete with petroleum, he said. About 35,000 people live in the town.

Vekselberg, 53, said in April he will step down as executive director of BP Plc’s Russian venture after Medvedev asked him to lead a new technology center near Moscow.

Fuel-oil Alternative

Shale oil is a cheaper alternative to fuel oil, at about 8,000 rubles a metric ton, freezes at lower temperatures and contains less sulfur, Tesis said. By 2012, Renova plans to produce 1 million tons of shale a year and process that into 140,000 tons of shale oil at Slantsy, where production has been suspended since 2004.

OAO Inter RAO UES spokesman Anton Nazarov said the state- run power utility is interested in shale projects. The press office at OAO Rosneft, another potential bidder, declined to comment.

Renova, which bought into Slantsy in 2007, resumed mining that had been shut in for three years at Leningradskoye, Russia’s largest shale mine. The deposit holds reserves of as much as 1 billion tons.

Unlike U.S. shale projects, Leningradskoye holds no natural gas reserves, Tesis said. The country has 37 billion metric tons of shale reserves while Russia’s total shale gas reserves were never counted, he said citing data from 1981.

Buyer Interest

Estonia, the only country that now uses oil shale as a primary energy source, stopped buying Russian shale in 2005, Tesis said. The Nazi army used Estonian shale oil to fuel battle tanks and air bombers during World War II.

During the Soviet era, as much as 9 million tons of shale a year was extracted at Leningradskoye and turned into fuel for ships and boiler houses.

Renova sees the sale of the state’s stake in the plant as the first step to reviving the local economy, Tesis said.

“Without a private investor in the plant, the town will die, there is nothing else there.”

For Related News and Information: Top stories from eastern Europe: EEUT Credit crunch page: WWCC Emerging market view: EMMV

Barentsnova: Russia celebrates Day of Entrepreneur

http://barentsnova.com/news/show/1795
2010-05-26

Russian entrepreneurship as a new business activity was born just recently: in 1991 Russia adopted a law that allowed private businesses to get established and employ people. The Russian 90-s turned into a boom in trading, imports and lots of criminal activities provoked by unstable political situation and new horizons for profit-making. Gradually, Russian business matured and stabilized enjoying huge progress; some experts acknowledge that business in Russia develops much faster than conservative legal and executive systems.

New political doctrine of Russia dictated new rules: business activities should be a basis for the country’s development. In 2007, Putin signs a resolution to introduce a new holiday in Russia – Day of Entrepreneur, celebrated henceforth every year on May 26. The holiday is not a day off.

Most forums, conferences and business workshops in Russia are dated to this celebration period.

Today opens a traditional hot-line for Murmansk businessmen and start-uppers. Anyone can get info on subsidies, legal issues and grants to businessmen by phone (8152) 486-549, 486-542.

Below come the words of greetings from Murmansk Governor, Dmitry Dmitrienko, who is now taking part in the Federation Council in Moscow (the upper house of the Russian Parliament) to exhibit the Murmansk region and local economic opportunities to federal authorities.

Take our warmest greetings on the Day of Russian Entrepreneurship!

This is one of the youngest holidays in the history of modern Russia; the holiday is to acknowledge the importance of the role of small and medium businesses in development of the economy and formation of civil society.

On this day, we honour initiative, energetic, talented and self-confident people that managed to find themselves in this rapidly changing environment despite any obstacles. We highly appreciate your contribution into the economic development and strengthening of social stability of the High North. Your charity activities that are so traditional for Russian entrepreneurship are also respected. We are sure that all your efforts, professional intuition and fresh ideas will be deservedly realized in the Murmansk region and will contribute to its further growth.

We wish all your business and creative plans and projects would come true. Let you meet only trustworthy partners and thankful customers. Happiness and prosperity may come to you and your families.

postcard: work.ua

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