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Rosneft To Ramp Up Global Expansion Under Trump

Rosneft HQ

A breakthrough in international strategy and the election of ExxonMobil CEO Tillerson as U.S. Secretary of State could stand to benefit Rosneft and Russia significantly.

Valentina Kretzschmar, a Wood Mackenzie analyst, sees the recent privatization deal in which Glencore and the Qatar Investment authority bought a 19.5 percent stake in the Russian oil major as ‘’a tectonic shift in the way the country is perceived by investors’’.

Wood Mac expects an acceleration in the foreign expansion of Rosneft, which has the ambition to become a major international player like ExxonMobil or Shell. The Russian oil giant has suffered from the international sanctions that have been imposed on Russia and some of its biggest companies and banks in the wake of its 2014 military campaign in Crimea.

In specific, western imposed sanctions against Rosneft CEO Igor Sechin and the restriction of transactions to and from Russian oil companies Rosneft and Novatek have stymied international growth.

Unlike other oil majors, Rosneft produces almost every drop of oil in its home country and, according to Bloomberg, its market value has suffered massively from international sanctions, currently representing less than one-fifth of ExxonMobil’s $378 billion.

As international sanctions significantly complicated international takeovers, 2014 and 2015 saw minimal takeover action on Rosneft’s part, but this all changed over the course of 2016, as the company struck several big acquisition deals, partnering up with international oil majors such as Eni, BP and Essaroil of India. Related: Oil Seesaws As Markets Wait For OPEC Cuts To Materialize

As Oilprice.com’s Nick Cunningham noted on Sunday, the cooperation in the exploration and production of Arctic oil between U.S. oil major Exxon Mobil and Rosneft might resume as a result of Trump’s attitude towards Russia.

In 2014 ExxonMobil and Rosneft, just ahead of the Western imposed sanctions, discovered as much as 700 million barrels of light oil in the Kara Sea, which depending on the stability of oil prices might be produced and added to the books of Rosneft and ExxonMobil. A much needed addition for both companies as they struggle to keep production up as capex falls.

And although Rosneft has agreed to reduce oil production in order to comply with Russia’s 300,000 bpd output cut, the company is unlikely to feel the negative consequences of an oil production cut, as it expects a 150,000 – 200,000 bpd seasonal production decline this spring.

U.S./E.U. sanctions might have slowed down Rosneft’s international expansion for the past few years, but the alleviation of sanctions could lead to a boost in international investment in the Russian Arctic and shale, such as the Bazhenov formation, dubbed to have at least 75 billion barrels of technically recoverable reserves. Enough to ensure Rosneft’s future as one of the world’s oil majors.

By Tom Kool of Oilprice.com

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Leave a comment
  • Bob on December 21 2016 said:
    A very good article. As you noted, nearly all of Rosnefts' oil liftings is in its own country, where foreign oil companies are restricted from having a controlling interest in any oil venture in Russia. Also important to add that Rosneft and Gazprom, as state owned companies, are the only Russian companies allowed to bid on Arctic shelf reserves. That's why Exxon is so eager to continue its partnership with the Russian company.
  • Erg on December 21 2016 said:
    Russia didn't commit to a 558 000 cut, but to a 300 000 one.

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