OIL INDUSTRY Uniquely Russian factors lead to IPO

The company's goal is to raise as much as $10 billion to pay off its debt.
LOS ANGELES TIMES
MURMANSK, Russia -- In a deep aquamarine fjord several miles off the coast of this chilly Arctic seaport, the biggest supertanker in the Russian oil fleet has dropped permanent anchor.
Oil plumbed deep underneath Siberia gets pumped by pipeline 550 miles to a transport terminal, shipped another 475 miles in railroad cars to the White Sea and finally ferried on icebreakers 450 miles across the water to this colossal floating oil terminal. Ocean-going tankers sidle up to it like calves at a teat, swallowing petroleum cargoes bound for Europe and the U.S.
Only in the supercharged world of Russian oil would this Rube Goldberg way of moving crude to market not only make sense, but make money.
"All our logistical plans were tied to the government building a pipeline in the north. But the government didn't build the pipeline. So we organized our own scheme," said Dmitry Bogdanov, vice president in charge of export for Rosneft, the once-negligible state oil company that is hoping -- if its other schemes go right -- soon to become Russia's largest oil producer.
This week, the road show for the first public sale of Rosneft stock gets under way in what is expected to be Russia's largest initial public offering, aimed at raising some $8 billion to $10 billion to pay off the debt Rosneft shouldered in 2004 by taking over the crown production asset of Yukos oil and effectively re-nationalizing much of the Russian oil industry.
What's next
Once the IPO is over, Russian President Vladimir V. Putin largely will have realized his ambition to create a massive, state-controlled energy sector able to act as a strategic lever of foreign policy. In exchange for private and foreign investment, Russia offers private shareholders the relative transparency and operating efficiencies that historically have not been part of the Russian public oil and gas sector.
Gazprom, the Russian state-controlled gas behemoth, opened its doors in January to foreign investment while assuring a secure 51-percent stake for the government. Its stock price has more than quadrupled in the past year, with a market capitalization, at $227.3 billion, bigger for a while this year than Microsoft's.
Now comes Rosneft, a company that only a few years ago was an awkward holdover of the old Soviet oil ministry, holding a scattering of production fields that hadn't been snatched up by the nation's wilier oil oligarchs.
The company managed to get its hands on a handful of important assets in the far north and eastern Siberia, not to mention big stakes in the oil and gas boom on Sakhalin Island.
But the big turnaround came in 2004, when in the widely publicized government tax assault on Yukos, the private oil company's crown production facility at Yugansk was sold off at a fraction of its value in a questionable transaction managed by the Kremlin. Rosneft -- whose board chairman, perhaps not coincidentally, is Igor Sechin, Putin's deputy chief of staff -- emerged holding the title.
Overnight, Yuganskneftegaz tripled Rosneft's output to 1.5 million barrels a day and transformed it into what Rosneft says is the world's second-biggest oil company, in terms of reserves. Net profits shot up more than fivefold in 2005, reaching $4.2 billion. But that was only the beginning of the once-obscure enterprise's transformation.