MOSCOW - Vladimir Putin on March 22 made his first energy appointment since his re-election as Russian president, naming Rosneft first vice-president Pavel Fedorov a deputy energy minister.
Fedorov, a former Morgan Stanley banker who helped negotiate a landmark Arctic drilling deal with U.S. ExxonMobil during his tenure at the state oil firm, is expected to oversee efforts to pull foreign investment into the energy sector.
"Russia’s energy sector is the largest industry globally and will require substantial strategic capital, and professional expertise, to deliver to the fullest on its tremendous potential," Fedorov said in comments provided to Reuters.
"Hence the role and the primary focus of my work will be on investment priorities, optimisation and rebalancing of tax policies, and building a broader strategic development framework for the sector."
Putin, who won the March 4 election and will serve as premier until his May inauguration, this month issued an order increasing the number of deputy energy ministers from six to seven to make room for Fedorov, two government sources said.
Rosneft said his duties would be reassigned to other senior executives.
Two weeks into the transition, there is little clarity about the shape of the new government, expected to be led by outgoing President Dmitry Medvedev, who announced last September that he and Putin had agreed to swap jobs.
Oil industry watchers expect Putin’s energy tsar, Deputy Prime Minister Igor Sechin, to remain the ultimate authority on Russia’s natural resources industries, though it is uncertain he will retain his formal post in a new government.
Long-time Putin ally Sechin, who hand-picked Fedorov for a top management job at Rosneft when he was serving as chairman, already had substantial influence over the oil industry as a top Kremlin lieutenant during Putin’s first two terms as president.
"Sechin will still be around long after I’m dead and buried," another government official said.
EXXON DEAL ALMOST DONE
Russia’s oil industry made a spectacular recovery from its post-Soviet malaise in the past decade by modernising production methods at giant Soviet-era fields in Western Siberia.
But Russia, which depends on the energy industry for more than half its state revenue, now has little to no spare capacity, unlike Saudi Arabia, its rival for the title of top producer, and is struggling to coax new oil out of the ground.
While Rosneft boasts 25 years of oil and gas reserves at current rates of production — the most of any listed oil company in the world — much of that is located in remote, inhospitable territory.
Before his promotion to company chief, Rosneft President Eduard Khudainatov was in charge of the construction campaign which brought one of the country’s main growth fields, Vankor, into production.
Arctic offshore zones, however, present the greatest challenge. State companies enjoy a monopoly on offshore oil exploration, although competitors are lobbying for access.
Initial outlays on Exxon’s Arctic deal with Rosneft, due to be finalised next month pending tax changes to ease the huge cost of development, are estimated at $3.2 billion.
But the eventual cost of developing the project could run to tens or even hundreds of billions of dollars.
"The strategic thrust offshore launched under President Khudainatov will enhance shareholder value for Rosneft shareholders and — even in the horizon of the next five years — will be worth tens of billions of dollars," Fedorov said.
"In the long term it could potentially add more than a hundred billion dollars to Rosneft’s capitalisation; moreover, it will also play an important role in strengthening the global competitiveness of the entire Russian energy industry."
Their joint venture is starting seismic studies of the three tracts in the Kara Sea, near the Arctic island of Novaya Zemlya, this year. A spokeswoman for ExxonMobil’s Moscow office declined to comment.
