Anna Shiryaevskaya
OAO Rosneft (ROSN)’s proposed acquisition of
TNK-BP will accelerate the state oil company’s eclipse of OAO
Gazprom (OGZD) as the dominant force in Russia’s energy
industry.
President Vladimir Putin used Gazprom, the
world’s biggest natural gas producer, to assert Russia’s energy
power during the past decade, winning pipeline deals and
controlling former Soviet allies. With the U.S. shale-gas boom and
domestic competition, Gazprom is losing ground as Rosneft, run by
Putin’s ally Igor Sechin, dominates the country’s oil output.
Absorbing BP Plc (BP/)’s Russian venture would
raise Rosneft’s crude production to about 4 million barrels a day,
more than any Middle East country except Saudi Arabia, and boost
its market value to rival Gazprom’s 3.7 trillion rubles ($120
billion). Putin, who returned for a third presidential term this
year, needs Rosneft to help maintain Russia’s record oil production
as he uses energy taxes to fulfill election spending promises.
“Rosneft will be a dominant player, with other
oil companies losing heft in comparison,” Cliff Kupchan, senior
analyst at Eurasia Group in New York, said by e-mail yesterday.
“We’re in a time of transition in the Russian energy sector.
Rosneft is a rising power, poised to become the sector’s primary
driver, while Gazprom is a declining power.”
Officials at Rosneft and Gazprom declined to
comment on comparisons between the companies.
Preliminary Deal
Rosneft submitted a bid yesterday to buy BP’s 50
percent of TNK-BP for a mix of cash and shares that values the
whole venture at $50 billion to $56 billion, a person with
knowledge of the matter said. Rosneft already has a preliminary
accord with BP’s billionaire partners, who own the other half of
the company, another person said.
Rosneft has relied on Sechin’s access to Putin,
who he’s worked with for more than 20 years, as the Kremlin
strengthened control over the energy industry and pushed oil output
to a post-Soviet high. Sechin, as chairman from 2006 to 2011,
helped transform Rosneft into Russia’s biggest crude producer with
assets from bankrupt Yukos Oil Co. He’s also ensured Rosneft gets
access to untapped oil reserves in the Arctic offshore, which is
restricted to state-controlled companies.
Higher Target
“Rosneft is helping Putin achieve a greater
state share in Russian oil production, while also being in the
forefront of driving future production growth from the Arctic,”
said Julia Nanay, a director at Washington-based PFC Energy.
Ending the TNK-BP venture and acquiring Rosneft
shares may open the way for BP to revive cooperation with the
state-run producer after its TNK partners blocked their plans for
an Arctic alliance last year.
Rosneft raised its output growth target for this
year to 2 percent from 1 percent initially planned after first-half
results, Dmitry Avdeev, finance vice president, said in an August
conference call. Should it buy all of TNK-BP, its output would jump
10-fold since 2004, before buying Yukos assets.
With the state as a majority owner,
Rosneft will be interested in spending money on new projects and
increasing output to ensure budget revenue through taxes, said
Sergey Vakhrameev, senior analyst at IFC Metropol. Russia gets
about half of its government revenue from the oil and gas
industry.
Gazprom Slide
Gazprom’s output may drop more than forecast
this year after demand shrank in debt-laden European economies,
Vsevolod Cherepanov, head of the production division at Gazprom,
said on Oct. 9. The gas company has seen output slide since
reaching a record 9.95 million barrels of oil equivalent a day in
2006.
Gazprom’s performance has been depressed since
the 2008 economic slowdown as success extracting gas from shale
formations in the U.S. transformed markets by reducing America’s
need for imported fuel and prompted European customers to seek
revised contract terms. Global production and trade of liquefied
natural gas, where Gazprom is still gaining experience,
increased.
The European Commission last month opened an
antitrust probe into Gazprom’s pricing in central and eastern
Europe.
At home, independent producers such as OAO
Novatek have been winning supply deals at the expense of Gazprom as
the government encourages more competition. Rosneft teamed up with
independent gas producer OOO Itera this year to develop its natural
gas business.
National Champion
Putin granted Gazprom a gas-export monopoly and
helped secure the Nord Stream pipeline project to Europe. Gazprom
gained control over Belarus’s pipeline network and struck a gas-
price deal with Ukraine that extended Russia’s lease of a Ukrainian
Black Sea port used as a naval base.
Putin sought in September 2004 to create a
single national energy champion for gas and oil by folding Rosneft
into Gazprom. The $7.6 billion takeover plan fell apart as Gazprom
and Rosneft openly disagreed over its terms. Since then, Rosneft’s
market value has grown to about $75 billion.
“This reflects Putin’s ideas about the need for
a leading role of the state in the energy sector,” Fyodor Lukyanov,
an analyst at the Moscow-based Council on Foreign and Defense
Policy, said. “The fact that the state is acquiring more control is
going to increase Putin’s self-confidence.”
Should Rosneft buy all of TNK-BP, the combined
company’s market value may total 3.52 trillion rubles, shy of
Gazprom’s 3.68 trillion rubles, based on yesterday’s closing
prices, including TNK-BP’s traded unit.
Rosneft’s acquisition of TNK-BP shares shouldn’t
increase Russia’s influence over the energy industry as the state
plans to reduce its 75 percent stake in the coming two years, First
Deputy Prime Minister Igor Shuvalov told reporters today.
Differences between the oil and gas markets may
make it hard for Putin to assert influence in international affairs
through Rosneft, Konstantin Simonov, president of Russia’s National
Energy Security Foundation. Oil is a buyer’s market controlled by
traders, while gas remains “much more monopolized,” he said.
http://www.bloomberg.com/news/2012-10-18/rosneft-to-replace-gazprom-as-putin-energy-driver-after-tnk-deal.html