Chinese Industrial Group To Buy Bankrupt Russian Oil Producer

China’s Xinjiang Sanbao Industrial Group is to purchase the bankrupt Tomskgeoneftegaz LLC, a small oil production company in the Tomsk region, for about ₽4 billion (US$51.2 million). Sanbao’s investments are expected to partially cover creditor claims after reaching a deal with the main creditor, the Kazakhstan collection agency Eagle LLP.

According to its website, Xinjiang Sanbao was established in 1992 and operates across the energy, chemicals, agriculture, and logistics sectors. The group implements projects in Central Asia with subsidiaries in Kazakhstan and Uzbekistan and participates in China’s Belt and Road Initiative. Its total import-export volume stands at US$12 billion.

Tomskgeoneftegaz holds licenses for the Kontorovichskoye and Sokonvarskoye fields in the Tomsk region. It was projected that in 2024, following additional exploration and field geophysical surveys, oil production (without investment in new well construction) would reach 46,200 tonnes solely through implementing measures aimed at enhancing reservoir recovery rates. With planned investments, the Kontorovichskoye field’s output should reach 77,000 tonnes in 2025. It is planned that production will eventually grow to 396,800 tons. The Tomsk region is in Western Siberia, north of Kazakhstan.

In early 2023, the Tomsk Regional Arbitration Court declared Tomskgeoneftegaz bankrupt and initiated bankruptcy proceedings. The creditors’ register included claims from Kazakhstan’s Halyk Bank for ₽3.35 billion, its now-former subsidiary Moskommertsbank for ₽270.6 million, as well as claims from Kazakhstan’s Temco Energy Group totaling ₽120.3 million. Halyk Bank and Moskommertsbank later transferred their claims to Eagle LLP.

Creditors also included the Tomsk Federal Tax Service and Temco Energy Group, although these liabilities were excluded from the settlement agreement.

Tomskgeoneftegaz had produced 16,220 tons of oil and gas condensate as recently as January-June 2020. Sanbao Industrial Group’s acquisition appears to have been a relative bargain, with Tomskgeoneftegaz being valued at about 10% of the mining licenses it holds, although it also appears Sanbao will also have to make significant investments to see these become profitable.

Tomsk city consumes more electric energy than it produces, with Sanbao possibly eyeing the acquisition as a way to insert itself into regional power supplies.