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26 I Cover story bne October 2018
gas giant’s oil subsidiary Gazprom Neft (based on Sibneft oil assets it bought from oligarch Roman Abramovich several years ago). The oil subsidiary is now worth as much as the gas produc- ing parts of Gazprom, say analysts.
Russia’s economy has long been dominated by state-owned companies but two privately owned companies have entered the fray in the last year: independent gas producer Novatek and privately owned Lukoil. With market caps of $38.4bn and $48bn respec- tively, both companies are in spitting distance of becoming the most valuable company in Russia.
Lukoil has had a stellar year and its mar- ket cap has risen faster and further than those of its state-owned peers, adding at
least $15bn in the last 12 months. The high point came at the end of August when Lukoil’s market cap topped RUB4 trillion ($59.1bn) on MOEX, making the company even more valuable than Sberbank.
Lukoil is highly regarded by investors and its market cap has risen faster and further than those of its state-owned peers, adding $15bn in a year to reach a peak of $50bn in August this year. The company almost surpassed Rosneft despite having less reserves and lower production levels. But investors like its management and the company’s good corporate governance. Also in August Lukoil launched a $3bn share buyback programme, and unlike Sechin, the owners didn't quibble about the price of its stock.
Novatek has also won itself a strong reputation for good management. It
is the least valuable of the big five,
but its market cap has been creeping
up relentlessly and reached $48bn in September, putting itself within a stone’s throw of second place in the ranking. In the middle of November Novatek even briefly overtook Gazprom in terms of value at RUB3.49 trillion, just ahead of Gazprom's RUB3.48 trillion.
Nominally privately owned, Novatek is clearly very close to the Kremlin and has been put in charge of developing Rus- sia’s liquid natural gas (LNG) capacity, for which it received a special export licence – making it the only energy com- pany in Russia other than Gazprom that can export gas.
So far the company has done a sterling job, having delivered on the construc- tion of a $10bn LNG processing plant on Russia’s western seaboard earlier this year on time and under budget. To an extent it has taken over Gazprom’s mantle as “tool of foreign policy,” as the Kremlin works to use energy as a diplomatic monkey wrench. Work on a second LNG plant was immediately launched and Novatek is already set
to become a major player in the global LNG business that will extend Russia’s European pipeline politics to the rest of the world.
Russia’s boom when Russian busi- nessmen finally became optimistic about the future of the country: the $131bn that came home in those two years was only slightly less than the
Russia's King of the Castle. Russian stocks market capitalisation $mn.
Source: MOEX, BCS GM
MOSCOW BLOG: Capital flight figures to make your eyes water
Ben Aris in Berlin
Since 1994, when the Central Bank of Russia (CBR) started publishing capital flight data, a total of $581bn has left Russia
as private sector outflows.
www.bne.eu
But what really makes the eyes water is that in the last decade and half there were only two years, 2006 and 2007, when there was a net inflow of capi- tal. Those years were the height of