Royal Dutch Shell Plc: Petronas and Petrobras give Rosneft $10bn IPO boost

From The Business Online
By Richard Orange
02 July 2006

TWO of the world’s most powerful national oil companies, Malaysia’s Petronas and Brazil’s Petrobras, are planning to purchase large stakes in Russian oil giant Rosneft’s imminent $10bn (£5.4bn, E7.8bn) London flotation. Their involvement will boost prospects for the success of Rosneft’s controversial initial public offering (IPO), which has already been reduced in size and is dogged by legal challenges and concerns about over-high valuations.

Rosneft is offering for sale stakes of around $700m. No investor will be allowed to buy a stake of more than 2% during the IPO. A source close to the IPO said that Petronas and Petrobas could replace UK oil companies BP and Royal Dutch Shell who are facing problems taking stakes. “BP and Shell are very keen, but the two of them have bigger issues. They need to get board approvals to buy into a company that they wouldn’t need to invest in a project,” the source added.

But winning Petronas support for the IPO is a big coup for Rosneft, although it will not give the float the authority that would have come if BP and Shell had taken strategic stakes. India’s ONGC is also understood to have shown interest in investing.

The source said that Petronas is one of the four companies Rosneft originally approached to offer strategic stakes of between $500m and $1bn as part of its flotation. Rosneft also approached China’s CNPC, BP and Shell.

The source said that of the four companies approached, Petronas, Petrobas and CNPC were currently the most certain to invest. No North American oil company is seeking a stake and some large investment institutions in the West have already said they will boycott the IPO on concerns about over high valuations and legal challenges.

But Rosneft, which owns the world’s largest oil reserves, claimed last week that the IPO was already oversubscribed.

Last week the final stages of the IPO got under way as Russians queued at branches of state-controlled bank Sberbank to register for shares in what has been billed as “the people’s IPO”. Trading in the shares is planned to commence on 14 July, one day before a G8 summit in St Petersburg.

Petronas ranks just behind European oil giants Eni and Repsol in Fortune magazine’s list of the world’s top private oil companies. A Rosneft stake would be Petronas’s first investment in Russia.

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