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. Last Updated: 07/27/2016

Nemtsov Reassures Oil Execs on Rosneft

First Deputy Prime Minister Boris Nemtsov has reassured foreign oil executives and financial lenders that the sudden change in leadership at state-owned oil holding company Rosneft will not affect its international agreements.


Nemtsov, who is also fuel and energy minister, said he would personally oversee joint projects between Rosneft and its foreign partners, Interfax reported.


Rosneft, the largest Russian oil company to remain in state hands, is being watched closely by investors as the government prepares to auction off 47 percent of the company later this year. It has also been mentioned as the core of a potentially larger "super holding" company which could include other producers such as Sibneft and Sidanko.


But concern over the company's future grew last week when the state replaced Rosneft's dynamic head, Alexander Putilov, with former industry minister Yury Bespalov -- considered to be a government insider.


Sunday's meeting, apparently called to soothe fears aroused by the dismissal, included representatives of Amoco, Shell, Texaco, Mitsui and the Timan-Pechora consortium.


"We were very impressed with Rosneft's leadership, with Mr. Putilov and his team," said Amoco's senior vice president, Dan Westbrook, who was present at the meeting. "We do hope the change in management will not result in a change in Rosneft's outlook and its project implementation."


Nemtsov's support will hopefully translate into more projects for foreign companies, Westbrook said.


Putilov's controversial ouster sent a shudder through Rosneft management as well as investors, who fear the move could endanger the company's involvement in numerous international projects.


Several of the holding's lucrative projects, including the $10 billion Sakhalin-1 offshore drilling agreement, stipulate unchanged company leadership as a condition for investment.


Nemtsov declared at Sunday's meeting that the government would not change its stance on Rosneft management. But analysts said a compromise, possibly the retention of Putilov as Rosneft CEO, could be adopted at a board meeting scheduled for Tuesday between Nemtsov and company management.


The meeting is expected to include Logovaz tycoon Boris Berezovsky, whose oil-investment consortium holds a controlling share in Sibneft, one of the candidates for unification with Rosneft. Rinaco Plus energy analyst Konstantin Reznikov said the government had not expected such a strong reaction from Rosneft managers, many of whom have reportedly threatened to resign in support of Putilov.


"All talk of economic restructuring [at Rosneft] is pure nonsense," said Reznikov, who endorsed the general industry view that the government and certain vested interests had seen fit to supplant Putilov with a more pliant and "cooperative" chief.


Once dubbed an orphanage for small unwanted oil companies, Rosneft is considered potentially profitable because of its enormous reserves. Most of its 1996 output of 13 million tons came from Purneftgaz, which analysts call one of Russia's better-managed oil companies.


Some of the holding's long term projects include a 40 percent stake in the offshore Sakhalin-1 project with Exxon and Japanese consortium Sodeco, a 20 percent stake in the $20 billion Timan-Pechora extraction deal in Western Siberia, and 7.5 percent of the Caspian Pipeline Consortium. Rosneft has also obtained a $150 million credit from the Export-Import Bank of Japan to reconstruct the Komsomolsk refinery and a $10 million unsecured loan from ABN Amro bank.


Industry experts believe the sheer scope of Rosneft's projects makes it unlikely they will suffer in the long run, but that the short-term confusion could be aimed at manipulating share prices prior to Rosneft's long-awaited privatization, announced last month.


Karen Vartanov, an oil analyst at Rye, Man & Gor securities, said that despite Nemtsov's backing, Rosneft would suffer if deprived of its able leadership.