Back in 1994, when addressing the World Petroleum Congress in Stavanger, Mr. Putilov spoke about the emergence of vertically integrated oil companies in Russia, the beginning of privatization and formation of joint stock companies (the first three being LUKoil, YUKOS and Surgutneftegaz). Today, the formation of such companies has practically completed. There are more than fifteen vertically integrated joint stock companies in Russia, including big companies such as Sidanco, Siberian Oil Co., Tatneft, Tyumen Oil Co., Rosneft, and others.
The key driving objective of reforms in the oil sector of the country's economy was to create a competitive environment both in the upstream and downstream operations.
It is noteworthy that at the initial phase of privatization the state-owned Rosneft company managed as a government agent or trustee the controlling blocks of shares in 240 state companies and enterprises.
Today, it controls the voting stocks of a meager 7 state-owned companies. The final stage of the industry restructuring provides for the creation of service companies: geophysical companies, manufacturers of oil machinery and equipment, producers of special oils and lubricants, R & D companies and design bureaus. The incorporation of said companies will mark the completion of the restructuring of Russia's oil industry that began in 1993.
Russian vertically integrated oil companies continue to grow and improve their performance. Naturally, their efforts in the past years was aimed at overcoming the decline of production and attracting large-scale investments. To this end, some oil companies proceeded with the placement of their stocks both in Russian and foreign securities markets.
Russian oil companies are working toward improved controls over their corporate cash flows in order to establish corporate profit centers, rather than dilute financial results between and among their affiliates and subsidiaries (crude oil producers, refineries or product distributors). Most of oil refineries in Russia are now working under new economic conditions which provide for compensation of all costs required for oil refining.
Organizational changes in the oil industry have entailed changes in all interrelated structures. The key problem of the Russian oil industry in the first half of this decade was a decline of production as a result of reduced domestic demand, lack of investments and working capital, and non-payments for delivered resources.
Thus, Russia's oil industry has reached the final phase of its restructuring and privatization.
Yet another development that characterizes the Russian oil industry today-the formation of transnational oil companies, e.g., Slavneft oil and gas company. Being a joint Russian and Byelorussian company whose performance rests on two key players such as Megionneftegaz that produces oil
