Vedomosti/RussiaToday: A $1 billion case

Igor Artemyev claimed historic victory in the Supreme Arbitrary Court: oil companies will pay an enormous fine, and they will be forced to agree with the government on the price of oil.

The shock treatment was prescribed to the Big Four oil companies by the head of the Federal Anti-Monopoly Service (FAS), Igor Artemyev, in 2008: Lukoil, Rosneft, Gazprom Neft and TNK-BP were found guilty of collectively maintaining monopolistically high prices on the wholesale market for oil products in the first three quarters. FAS had subsequently charged them with a fine of 5.4 billion rubles.

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In February 2009, Artemyev stated that the oil companies did not get the hint and continued inflating prices in the fourth quarter of 2008 and in January-February 2009. The new fines were much higher.

The companies have not paid a dime. They disputed the decision of FAS, as well as the incurred court fees. The case of TNK-BP, which was contesting the initial fine of 1.1 billion rubles, moved quicker and more favorably than the others. By October 2009, the company won over FAS in three instances in the West Siberian District, but officials had filed a supervisory appeal. Meanwhile, FAS won in the case against Lukoil in the Arbitrary Court of Moscow, but the outcome of this process, as well as the lawsuits against Rosneft and Gazprom Neft, depended on the decision of the Supreme Arbitrary Court (SAC) in the case of TNK-BP.

In his February interview with Vedomosti, Artemyev said that he finds the lawsuit against the oil companies a historic case, and even compared it to the U.S. Supreme Court’s decision on the division of John Rockefeller’s oil monopoly, Standard Oil. If the court’s decision favors FAS, he said hopefully, the case will still be remembered 100 years from now.

Yesterday, his hopes were realized: the presidium of the SAC overturned the rulings made by lower courts, and denied TNK-BP’s contestation of the decision made by FAS.

The reasoning in the decision will be provided later. But considering the three SAC judges’ decision to transfer the case to the presidium, the court agreed yesterday that FAS may pursue TNK-BP Holding as a single group of stakeholders and one of the participants in collective dominance of the national market -- despite the fact that the group’s refineries are located in only three regions. Also, the prices of TNK-BP Holding OAO influence overall competition, and their monopolistically high level could be calculated according to only one criterion -- cost (in excess of economically justified costs and profits).

Because the evidence compiled against the other companies was identical, it is very likely that the courts will also deny their contestations against the FAS’s decision, says Ilya Rachkov, a partner at Noerr. Yesterday, TNK-BP spokesperson Natalia Apolosova also spoke to the presidium about the precedent nature of the decision.

Rosneft and Gazprom Neft refused to comment.

A Lukoil spokesperson said that the decision made by the SAC was made pertaining to TNK-BP and does not have any direct effect on the outcome of the trial involving his company.

“We will utilize all legal means available to contest the decision of FAS. We have not overestimated our chances of winning,” the spokesperson said.

After the meeting of the presidium, Artemyev told Vedomosti that the FAS is not planning to file any new cases against oil companies. There is no sense in stifling the companies with fees, he explained, but the court’s decision should encourage them to revise their price-forming principles for petroleum products.

The FAS has already prepared amendments prohibiting prices that were formed on the stock exchange as non-market prices. As was earlier stated by Artemyev, at least 15% of oil products need to be sold on the stock exchange. Yesterday, Anton Karpov, vice president of the Interregional Exchange of the Oil and Gas Complex (MBNK), said that if the current trends continue, then by the end of 2010 more than 10% of oil products which are made in the country will be traded through the stock exchange (currently it is 6-7%).

The fine of 1.1 billion rubles which TNK-BP will have to pay will mark a new record. Before the highest fine paid was in the amount of 798 million rubles by Mechel in 2008; the case was settled out of court. The decision that was made on the TNK-BP case will help FAS collect nearly $1 billion in fines, considering the two collective dominance cases and about a hundred smaller-scale cases against oil companies, Artemyev estimated yesterday.

The vice president of TNK-BP management, Igor Maidannik, and the director of the TNK-BP’s legal department, Vladimir Kuznetsov, did not comment on the Supreme Arbitrary Court’s decision.

26.05.2010

Oil and Gas Eurasia: TNK-BP Will Expand High-grade Bitumen Production

http://www.oilandgaseurasia.com/news/p/0/news/7441

In 2010 TNK-BP plans a 60 percent expansion of its premium-class bitumen production, compared to 2009 output, in order to meet the greater demand for high-quality bitumen shown by Russian road construction organizations. The greater demand is a result of the amendments to Russian legislation that increased roadbed warranty lifetime to seven years.

The production of the company’s brand-new polymer-modified bitumen TNK Alfabit will be expanded this year more than 1.5-fold to reach the production levels of 36,000 tons per year. Subject to compliance with the relevant road construction technology, TNK Alfabit will increase the guaranteed road life cycle from 2—3 to 7—10 years, compared to ordinary bitumen, without intermediate repairs.
TNK Alfabit is produced at TNK-BP’s pilot plant in Ryazan.  
In the framework of expanding its cooperation with end-consumers TNK-BP began shipping the bonding polymer-bitumen (BPB) TNK-Alfabit 60 to be used during the road works along the M4 “Don” Federal Highway that connects the Centre of the European part of Russia to the Northern Caucasus, Lower Volga region and Black Sea coast.
“Premium—class bitumen is a high-tech product that enables our company to remain a reliable supplier for largest and most significant sites. These products offer great savings opportunities thanks to which the money can be redistributed to new facilities under construction”, said Eldar Verdiev, Head of Bitumen Performance Unit, TNK-BP.
Copyright 2010, TNK-BP. All rights reserved.

Rigzone: TNK-BP Concludes Seismic Exploration in Astrakhan Region
TNK-BP 5/25/2010
URL: http://www.rigzone.com/news/article.asp?a_id=93720

TNK-BP has completed seismic exploration of all of its fields in the Astrakhan region: Svetlosharinskoye, Kirikilinskoye and Vatazhnoye Severnoye. The company conducted 2D seismic at a depth of 1400 km, as well as a geoelectric survey and other geological surveys. Currently the data that was gathered is being analyzed.

TNK-BP used the most advanced technology available during the seismic exploration at the Vatazhnoye Severnoye and Kirikilinskoye fields. The fields are located in the environmentally sensitive Volga delta, close to specially protected natural territories and internationally important wetlands. Furthermore, the company did not drill or use chemicals that could damage the local fishing industry.

"TNK-BP is determined now and in the future to handle environmental protection in the Volga delta with care when conducting geological work and the subsequent oil and gas production. We completed a series of surveys and the results have given us justification for drilling the first prospect well in the Astrakhan region. We plan to begin the drilling in 2011," said Francis Sommer, Executive Vice President, Technology, TNK-BP.

TNK-BP acquired three 25-year licenses to develop fields in the Astrakhan region at an auction in 2006.

26.05.2010

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