Sibneft Increases Tax Payments To Russian State

by Tatania Smolenskaya, Tax-News.com, Moscow

15 July 2005

Reporting its 2004 results this week, Russian oil company Sibneft showed a 30% tax charge of $578m, representing a catch up on previous years' underpayments. Sibneft is 57.5% owned by investment firm Millhouse Capital, which is presumed to represent Roman Abramovich's interests.

Sibneft's 2004 net income of $2.05bn was viewed as slightly disappointing by the markets, but the fact that Sibneft has apparently been able to settle its tax affairs without high-profile disasters could be seen as positive.

State-held gas giant Gazprom is believed to be considering a bid for the 72% of Sibneft held by the latter's core shareholders and a further 3% on the open market, which would give a super-majority 75%+1 share stake. Doubters point to Gazprom's net $1.45bn debt, and ask how it could finance the supposed $10bn the Sibneft shares would cost at $3 each; but this ignores Gazprom's expectations of a $7bn receipt from the state for the acquisition of 10.7% of its treasury stock.

The fact that the authorities have allowed Sibneft to remain 'clean' from a tax point of view could be seen as evidence that they don't want any blood on the carpet in advance of the Gazprom acquisition, having learnt a good lesson from the Yuganzneftegaz debacle.

The company said that the Russian tax authorities are still auditing its 2002-03 accounts, but does not expect the outcome to have a "material impact" on its financial position. Sibneft's announcement that it would pay a record $2.9bn annual dividend was seen by Moscow analysts as evidence the company is preparing for a sale. Russian president, Vladimir Putin, said that the gas company Gazprom and the state-owned oil firm Rosneft had been in talks with Sibneft's shareholders.

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