the RUSSIA oil & gas competitive intelligence report - Report Buyer

Russia Oil and Gas Competitive Intelligence Report 2010
The government is moving forward plans to privatise a larger share of Rosneft. In July 2010, the Finance
Ministry included the country's largest oil producer in the list of nine companies earmarked for partial
privatisation in 2011-2013 in an attempt to eliminate the budget deficit. Up to 24.16% of Rosneft could be
sold, leaving the state with the 51% controlling stake. As the jewel in the Russian state sector's crown, the
Rosneft stake could provide around RUB500bn (US$16.5bn) for the treasury, or half the overall
divestment target. A non-controlling stake in Transneft may also be sold, although government officials
have been given conflicting signals.
In July 2008, Russia’s state market regulator, the Federal Financial Markets Service (FFMS), put a 25%
cap on the proportion of shares domestic mineral resources companies, and other ‘strategic’ industries,
can list abroad. Moreover, under the new rules, only 5% of the energy companies’ total sales are allowed
to come from operations in foreign countries. This will push Russian companies to raise finance at home,
in line with President Dmitry Medvedev’s plans to turn Moscow into a major financial centre by 2020.
The head of the FFMS said at the time that the companies’ shares can, and therefore must, be traded in
roubles in Russia, adding that all the necessary conditions to enable that process were in place. The ruling
is the most explicit recent step in the Kremlin’s programme of consolidating control over Russia’s
mineral resources and suggests further downside risks to an investment climate already marred by a poor
licensing, privatisation and regulatory structure.
As the extent of the global economic meltdown became clear in September 2008, Russia's main producers
collectively approached the Kremlin for assistance. The CEOs of Lukoil, TNK-BP and Rosneft plus
Gazprom’s Deputy Chairman Alexander Ananenkov wrote to Prime Minister Vladimir Putin asking for
state credit ‘to pay for foreign debts’. Although the companies did not specify the required sum, they
argued that the overall debt volume of the Russian energy sector was around US$80bn and required state
action. The companies also requested Putin to order the finance ministry and the central bank to work out
a mechanism of financing strategic projects with the help of 'state targeted credits'.
The government has signalled its intention to provide US$50bn from Russia's gold and foreign exchange
reserves to help refinance domestic corporations' foreign debt and grant selected tax holidays. Although
these moves will be supportive, they may not be enough on their own to help Russia's major oil producers
ride out the current crisis. Each of the major companies is therefore also adopting its own strategies to
minimise the negative repercussions of the economic downturn.
International Energy Relations
South Korea
Gazprom and its South Korean counterpart Kogas signed an MoU in June 2009 to jointly study the
options for delivering Russian gas to South Korea. In particular, the MoU will look at ways of supplying
South Korea with gas from the Sakhalin projects. According to Platts, under the terms of a previous
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