Rosneft – The new star of Russian energy

In Energy Strategy-2030 of Russia, enacted at the end of 2009, it was stated that Moscow would put emphasis on the Asia-Pacific region in its energy exports in the coming years. Petrol and petroleum exports going to this region were targeted to be raised from 6% to 22-25% of total exports, and currently non-existing natural gas export to this region to 19-20% scale of total natural gas export. This Asia-Pacific opening is part of Moscow’s strategy to increase national revenues while promoting economic development in East Siberia and the Russia Far East, and, as well as to stem these regions’ chronic emigration problem. Also, increasing negotiating margin in its economic cooperation with EU by operating new oil and gas pipelines to the East also constitutes an important column of this strategy.

Rosneft, Russia’s newest energy giant, is a key pillar of this initiative. As one of Putin’s favoured firms, Rosneft owes a great deal of its success to Kremlin’s state-centred energy strategy — itself a part of a larger strategy to re-establish Russia as a global power. In that context, efforts to develop the company seem to have gained pace over the past years, and Russia’s currently rank, first with its 12.7 share in world oil production as of 2012, would likely to stay same, at least in short term.

Monopoly in oil, rival in gas…

First of all, Rosneft, winning the licenses for the petroleum reserves at Vankor, Verhne-Chonskoe and Yurubchenko-Tokhomskoe, is to expand petroleum reserves in Eastern Siberia — close to the Asia-Pacific region. At the end of May, Rosneft secured operating rights in the Albanovsky and Varneksky regions of the Barents Basin, competing in this area with Gazprom. Energy reserves in the Barents Basin include 2.2 billion tons of crude petroleum and 1.2 trillion cubic meters of natural gas. Secondly, Rosneft is also looking to vary the cooperation it undertakes with international energy companies. The company is interested in prospecting for new reserves and technology transfers. It has signed new North Pole exploration agreements with American Exxon Mobil, petroleum extraction contracts in the Sea of Ohotsky with Japanese Inpex, and agreements with the Chinese State Petroleum Company (CNPC) on petroleum exporting and energy cooperation in several different areas of Russia. Under an agreement signed in 2009, Rosneft is annually exporting 15 million tons of petroleum to China through the Eastern Siberia-Pacific Ocean pipeline. This volume is anticipated to rise to 50 million tons over the next three to five years as a result of the expansion of the existing pipelines, new ones coming online, and more active use of ports such as Kozmino.

The Sechin Factor

Igor Sechin, Rosneft’s chairman, has played a major role in the company’s recent rise. Sechin was identified by Time magazine as the “oil titan” in its list of the 100 most influential people in the world in 2013. He was the only Russian included in the list. In the past, Sechin worked for the KGB, the Soviet Union’s intelligence service. His close friendship with President Putin led to his becoming deputy chief of the Kremlin Presidential Administration in the early 2000’s. Early in 2004, Putin appointed Sechin to the board of the state company Rosneft, at that time only the sixth largest petroleum company in Russia. The move was part of Putin’s bid to consolidate state power over the energy sector. When Sechin was appointed as the chairman of the Rosneft’s board of directors, he maintained his powerful position within the president’s administration. At this time, Yukos, then the largest petroleum company in Russia was having its assets transferred to Rosneft, a process which continued until 2007. And Sechin was one of the main actors in the Kremlin’s energy policy in this process.

To sum up, energy politics and “pipeline diplomacy” which aimed Russia to regain its “global power” position in international arena seem to keep their vital importance still for long as key instruments of Kremlin’s foreign policy. During 2000’s, Putin’s this state-centred energy strategy allowed Gazprom to become a giant company in both the domestic and international natural gas markets. And now, it is being reapplied to clinch Rosneft’s dominance over the petroleum production and exporting sector. Rosneft is taking on important duties for the Kremlin, and it looks as if it will be one of the vital pillars of Russia’s transformation into an energy superpower.

Full article: Rosneft – The new star of Russian energy (Turkish Weekly)

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