Andrey Korolev , Sintez
Release Date: 2010-08-12
Andrey Korolev, Executive Director of SINTEZ Group, has been interviewed by Russiaenergy.com for a Russia Special report for Oil and Gas Financial Journal to discuss the main milestones and achievements of Sintez Group, building synergies between the different strategies in oil and gas and its main investments in the future growth.Could we start with a brief presentation of the main milestones and achievements of Sintez Group since its inception?
Our first main milestone, after the company was created in 1987, came in early 1990ies when we started working in oil trading. After that, we entered oil production and created Negusneft (“negus” translates from the Khanti-Mansi language as “sable”) from scratch. Another difficult stage was entering Arctic shelf projects that led to a ‘toxic’ situation when the licenses held by Sintez Group were involved in the sphere of the interests of a few state companies. In the oil and gas sector we decided to diversify geographically and started to work in Namibia, Indonesia, Syria, Kurdistan; we also used to have a rep office in Libya. Generally, it is common for a small private company to operate on marginal markets because it has always been difficult for the independent producers in Russia to compete with state companies.
The next stage came when RAO UES of Russia was pursuing the restructuring of the energy system and started to create energy market in 2007, we at Sintez Group decided to make use of the privatization of the energy sector. We participated in TGK-2 (territorial generating company No. 2 – Editor’s Notes).
Concerning our current assets, we’re moving towards vertical integration of our energy assets and heat generation assets in Russia and abroad. In terms of figures, our company’s annual gas consumption in Russia is reaching about 5 bln cubic meters; we would like to supply at least half of this amount.
It is very interesting to ask an independent player to tell more about the new investments and how you manage to build synergies between the different strategies in oil and gas?
We hope to create this synergy when we accomplish the vertical integration. It is all about the three main components: capital, the right political resources and the team. We have the team that is very experienced in the oil and gas markets and we want this team to further transfer its successful expertise to other regions and markets. We have the same expert team in electricity and hope to create a synergy. Electricity companies appear to be underestimated, according to very objective criteria – there’s simply not enough electricity market and no heat market. We hope that heat market liberalization that is expected in 2012 would provide an impulse for a big leap.
By that time, we need to solve the task of including our gas assets in our structure. At least, I hope to see liberalized access to gas transport system and real market for heat and electricity. It’s the condition to survive.
As you have said, the whole link between your company’s divisions depends on the upstream business… Where are your main ENP assets and how does Sintez Group manage to build and develop its offshore expertise?
As a result of drilling in the Arctic, we have made a few discoveries. Now these assets are on state balance because our company in the Arctic shelf is 50% our own and 50% state-owned.
We have managed to gather a good team of experts who have the experience of opening the Stockman field, working in the Sakhalin or in Vietnam. There’s also a personal reason: the Father of one of the shareholders was a military sailor and the sea has been his passion since childhood. Now everyone has forgotten the times when the cost of oil was $9 / barrel and it was possible to easily attract high quality experts… At that time, Sintez was the only company to drill on the Arctic shelf. We could make a strategic breakthrough there if politics had not interfered. Honestly, Sintez was a pioneer in a few other directions: the first private power plant in 2006 was constructed by Sintez Group when no one was regarding privatized electricity market that became obvious in few years.
Now that oil and gas prices aren’t as attractive as they used to be and there are more and more environmental issues… A lot of investments are put on hold. Is exploration on the Arctic shelf and Sakhalin feasible in the long term?
To make it financially feasible, we need tax holidays on the Arctic shelf, same as it was done for production in East Siberia.
To what extent does Sintez Group depend on the international markets and where are your main investments for the future growth?
As I have said, we plan to work in the countries with favorable political and financial climate and where we can apply the unique expertise of our team. Accordingly, Namibia and Indonesia are on the top of my mind for oil and gas; South Africa can also be regarded but rather for subsoil resources in general. We’re present in the Balkan region for electricity and plan to further expand there. The matter is that we’re limited in terms of financial resources and we can’t embrace the unlimited.
Since OGFJ is a financial publication, maybe you could give a final message to our readers?
I would like to thank you for this opportunity.
| Company: | Sintez |
| Position: | Executive Director |
| Country: | Russian Federation |