Sibir's tie-up with Abramovich turns sour

Sibir Energy, the AIM-listed Russian oil explorer, said yesterday that its interest in a joint venture it has with Roman Abramovich's oil giant Sibneft had been mysteriously diluted from 50 per cent to less than 1 per cent.

Sibir Energy, the AIM-listed Russian oil explorer, said yesterday that its interest in a joint venture it has with Roman Abramovich's oil giant Sibneft had been mysteriously diluted from 50 per cent to less than 1 per cent.

Its statement to shareholders added that its board had obtained legal opinion that the dilutive measures carried out at the joint venture "were illegal" and that it believed it had grounds for restitution of the shareholding. Sibir said that it was first informed of the dilution on 15 April. Shares in the group have been suspended since 19 April.

Yesterday, the group informed its beleaguered investors that their shares are likely to remain suspended until after an extraordinary general meeting mid-July. The 50-50 venture, called Sibneft-Yugra, turned sour when Sibir discovered that its shareholding, worth around $100m, had been mysteriously diluted to less than 1 per cent. Sibir said yesterday it still did not know who had carried out the dilution.

Sibneft-Yugra was established in 2000 to explore the oil reserves of the Priobskoye field, in Siberia, and accounts for about 20 per cent of Sibir's total assets. The business is run by Mr Abramovich's Sibneft. Sibir now intends to start a process in the Russian courts in an attempt to recover its shareholding but analysts warned that the company faces a lengthy battle.

Meanwhile, the company will have to reimburse the Moscow City government, which is also a local partner for the company. Sibir and the City government run a joint venture called Moscow Oil & Gas (MOGC), which boasts a series of assets including the strategically important Moscow Oil Refinery. Sibir secured a 45 per cent holding in MOGC by putting up its holding in Sibneft-Yugra as collateral.

But following the dilution at Sibneft-Yugra, the Moscow government has asked to be reimbursed. Sibir will do this by issuing new shares to the municipality. The number of new shares Sibir has to issue will be decided by an independent valuer and is expected to be finalised by 11 June. The scheme needs to be approved by Sibir shareholders at the EGM. Adverse publicity will not be welcomed by Mr Abramovich. He is thought to be keen to sell a stake in Sibneft to an international oil group.

One Russian-based oil analyst, who asked not to be named, said: "Mr Abramovich is the major shareholder at Sibneft and will certainly be up to speed with the goings on at Sibneft-Yugra. Very little happens at Sibneft without Mr Abramovich's consent."