Sechin Says the State Backs BP in Russia

Deputy Prime Minister Igor Sechin said Wednesday that the state supported BP's presence in the country and that the Cabinet would gradually seek to remove some government officials from Rosneft's board.

Government office-holders on the boards of state-controlled companies came into focus last week when President Dmitry Medvedev said most of them should relinquish their seats to independent directors.

Four government officials sit on Rosneft's nine-member board, including company chairman Sechin.

Rosneft will not make any urgent replacements, Sechin said at a news conference. He declined to say whether any changes would take place before next year's annual shareholders meeting.

"Such work will be done carefully, so as not to damage [the company's] capitalization," he said.

Rosneft has three independent directors and two other government representatives, Rosneft chief executive Sergei Bogdanchikov and Andrei Reus, chief executive of state-owned Oboronprom.

Medvedev said that even fully state-controlled companies should have at most two government representatives on their boards, although he added that one of them must be chairman.

Sechin also reiterated the government's stated intention to keep out of the ongoing dispute between BP and its Russian partners in TNK-BP. He said officials had no prejudice against the British oil major.

"Overall, we support the work of BP in Russia," he said. "They have introduced new corporate government principles, technology, personnel training and transparency, which makes us very happy."

He said Rosneft was looking at expanding its cooperation with BP, which bought $1 billion worth of shares during Rosneft's initial public offering in 2006.

Sechin also said the government was studying additional measures to encourage oil companies to increase output. Prime Minister Vladimir Putin and Cabinet ministers will discuss the proposals in the northern port of Arkhangelsk on Friday, he said.

In addition to proposed tax breaks for the industry that are currently being considered by the State Duma, the Cabinet could approve more incentives by the end of this year, including construction of roads and energy facilities near new fields, Sechin said.

With the country's oil output falling since the start of the year, Putin made a tax relief package for the industry one of his first priorities after becoming prime minister in May. Producers complained of rising costs at aging fields and the need to increase investment to develop distant, new fields.

Sechin also said the government was still hoping to keep annual output from falling below last year's level.