Published On: Sun, Feb 23rd, 2014

Leonid Mikhelson’s Petrochemicals Company SIBUR Buys Out Rosneft Stake in JV for $1 Billion +

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Leonid Mikhelson / Getty

Sibur, the giant Russian petrochemicals company 57.5% controlled by Russian billionaire Leonid Mikhelson, has reached an agreement with state owned Russian oil company Rosneft to acquire its’ 49% interest in their Yugragazpererabotka gas processing joint venture. The interest has been held by Rosneft-owned RN-Holding, formerly TNK-BP.

The terms for the purchase of the Rosneft stake were not disclosed but analysts estimate the price may be in the range of between US$1 billion to US$2 billion.

After the deal closes Sibur will own 100% of the venture, and will continue to have access to guaranteed gas supply from Rosneft of up to 10 billion cubic metres a year of gas as feedstock for their plants under a new supply agreement now extending to 2032.

The sale of the plant, which processes gas co-produced at some of Rosneft’s oil fields, known as APG, which stands for associated petroleum gas, will be among the first sale by Rosneft of assets it picked up in the US$55 billion acquisition of the TNK-BP joint venture last year.

The new supply agreement was signed by Igor Sechin, President of Rosneft and Chairman of the Management Board, and Dmitry Konov, CEO of Sibur.

Igor Sechin commented on the new agreement said: “The agreement to increase our APG supplies to Sibur is perfectly in line with our gas strategy as it will help us monetise Rosneft’s gas potential, hit the 95% target ratio of associated gas utilisation across Rosneft’s fields, and produce high value added gas-derived products.”
Dmitry Konov responded: “By signing the agreement with Rosneft to increase associated petroleum gas supplies, Sibur reaffirms its commitment to the corporate strategy of securing long-term access to feedstock. The extended tenor of the APG contracts highlights the strong ties between Sibur and Rosneft, which remains the key APG supplier for Sibur’s gas processing facilities.”

Leonid Mikhelson

New Sibur polypropylene plant in Siberia

The Yugragazpererabotka venture owns and operates three gas processing plant, Nizhnevartovskiy, Belozerniy and Nyagangazpererabotka, as well as all the pipeline infrastructure that transports APG from compressor stations to its facilities. The total capacity of Yugragazpererabotka’s gas processing plants currently is 13.4 billion cubic metres a year.

Sibur’s corporate activities span the entire petrochemical process chain from gas processing, production of monomers, polymers, plastics and synthetic rubbers to the processing of plastics and a variety of other materials. Sibur is a vertically integrated company with its gas processing facilities providing feedstock for its various downstream petrochemical production lines.

Sibur operates 27 production sites located all over Russia, has over 1, 500 major customers engaged in the energy, automotive, construction, consumer goods, chemical and other industries and employs over 28, 000 people in 60 different 60 countries of the world.

The name Sibur stands originally for the “Siberian and Urals” Petrochemicals company, and which was spun out of state owned gas company Gazprom in 2011 after it had briefly flirted with bankruptcy. Then it finally ended up, complete with a strong balance sheet, in private hands and controlled by Lenod Mikhelson.

About Leonid Mikhelson

Leonid Mikhelson is today one of Russia’s most successful industrialists, working frequently in partnership with fellow billionaire Gennady Timchenko.

Mikhelson’s principal corporate interests are his 57.5% interest in the petrochemical producer Sibur, and as well he owns 25% of the energy company Novatek, which he founded and where he acts as CEO. He is also the largest shareholder of Russia’s First United Bank.

His personal fortune is over US$15 billion, according to the Forbes billionaires list as at March 2013.

Leonid Mikhelson began his career as a foreman of a construction and assembling company in the Tyumen region of Siberia, where he worked on the construction of the first section of the Urengoi-Chelyabinsk gas pipeline.

In 1985 he was appointed as Chief Engineer of Ryazantruboprovodstroy. In 1987, he became General Director of Kuibishevtruboprovodstroy, which in 1991 was one of the first companies in Russia to sell shares and become a private company, to be renamed NOVA – with a much shorter name being not the least of its advantages.

Mr. Mikhelson remained NOVA’s Managing Director from August 1987 until October 1994. Then Mr. Mikhelson became General Director of Novafininvest, a holding company, which included NOVA and other gas producers amongst its assets.

Since 2002, Mr. Mikhelson has served as a member of the Board of Directors and Chairman of the Management Board of gas company NOVATEK. He also serves on the board of several other companies.

Leonid Mikhelson graduated from the Samara Institute of Civil Engineering in 1977 with a degree in Industrial Civil Engineering. He has been awarded the Order of the Badge of Honor of the Russian Federation.

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