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. Last Updated: 07/27/2016

Rosneft Changing Several Key Rules

VedomostiSergei Bogdanchikov, left, speaking with Vladimir Bogdanov at an energy meeting on Sakhalin Island in March.
The government plans to drop a key requirement that Rosneft's president have at least 10 years of oil experience in a sign that the long-serving Sergei Bogdanchikov may be replaced.

Under proposals made public by the board of the state-controlled company on Monday, the president will no longer be required to have a decade-long work record in the industry, a change that would greatly broaden the pool of prospective candidates for the position.

This and other changes will take effect after being approved at a shareholders' meeting on June 19.

"This would open the way to hire someone who is not a career oilman," said Alexei Kokin, an analyst at investment company Metropol. "Rumors about Bogdanchikov's dismissal have been out there for a long time. His team has been entirely replaced over the past two years."

Further fueling speculation that Bogdanchikov is on his way out, the Rosneft president will not attend the St. Petersburg International Economic Forum later this week, where chiefs of rival oil producers will gather at a special session to discuss the prospects for the global market. Deputy Prime Minister Igor Sechin, who is Rosneft's chairman, will preside over that session.

Bogdanchikov, who has run Rosneft since October 1998, has never openly clashed with Sechin or any other board member. In his latest public appearance, Bogdanchikov traveled to Georgia's breakaway republic of Abkhazia last week to announce that Rosneft would explore the region's sea shelf. He oversaw Rosneft's controversial acquisition of assets from fallen giant Yukos, which propelled Rosneft to its leading spot in the industry.

Rosneft spokesman Nikolai Manvelov said the purposed changes would merely bring the company in compliance with federal legislation.

He declined to comment further.

No names have surfaced so far for possible candidates to replace Bogdanchikov.

The upcoming shareholders' meeting is also expected to approve proposals to introduce unspecified sanctions against the president if he is uncooperative with board members and to set up a corporate reserve fund. The plans were published on the company's web site.

Rosneft's president would be required to comply with requests from any board members -- including Sechin -- to provide any information about the oil producer and its units, which may suggest that the board has had problems with this before. The employment contract between the company and the president would hold the executive responsible for noncompliance if he fails to provide the information.

"Apparently, the board will play a greater role in running the company," Kokin said. "I think they have conceived a plan to reform the management."

In a surprise board shuffle, the government recently nominated Vladimir Bogdanov, chief of the privately held oil producer Surgutneftegaz, as an independent board member for Rosneft.

Rosneft's board also wants to set up a corporate reserve fund to cover losses, if any, or buy back bonds and shares. The fund would total 5 percent of the company's equity, which currently stands at 106 million rubles ($3.5 million).

The company could use the modest fund to channel some of its profits to minority shareholders through a "fair buyback," which is international practice, said Pavel Sorokin, an analyst at UniCredit Securities.