ZMB chief arrest will not affect MOL production, sales

Vitka was detained on Wednesday after local prosecutors interrogated him in connection with criminal procedure they launched in January for ZMB had allegedly extracted oil faster than it was authorised to. Vitka has been put in custody for two months on Thursday, Hungarian newswire MTI reported on Friday.

“Exploration and sales are going undisturbed and deputy managers have taken the place (of Vitka)," Szabolcs told portfolio.hu

Russian authorities have so far charged two fully-owned Yukos subsidiaries with exceeding extraction quotas. One of these, Yuganskneftegaz, was auctioned off at the end of 2004 so as the state could pocket some of the USD 27 billion tax arrears of Yukos.

A similar procedure was launched against Tomskneft early this month, which pushed down the share price of another main Yukos unit, Samaraneftgaz, as the Tomskneft case made market players concerned that authorities would go on with the forced sale of Yukos subsidiaries. They have the same fears with relation to ZMB, MTI said.

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While certain sources claim that ZMB violated volume regulations, others say the company had requested and had been given authorisation by the Ministry of Natural Resources before it began production expansion investments. Other government bodies, however, doubt the existence of such permit.

We believe the events are drifting towards a scenario where the Russian government is selling all of Yukos' smaller interests. The biggest question for MOL is which company would buy Yukos' 50% ZMB package, and whether MOL would be able to strike the same deals with the buyer they had before or the profitability of exploration will change.

It has become evident from these events that a foreign company must operate in a joint venture if it wants to do oil business in Russia at all. Therefore, MOL cannot even contemplate buying the 50% Yukos stake in ZMB.

Source: Portfolio online financial journal



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