Growing pressure on Russian government
resources as oil prices slide to six-year lows has prompted Economy
Minister Alexei Ulyukayev to announce that the government will not fund
four out of five Rosneft projects. The Russian oil major had requested
financing from the country’s sovereign wealth fund for those projects.
"They were many requests for funds from
the sovereign fund,” Slava Smolyaninov, a strategist at BCS, a brokerage
firm in Moscow, told New Europe by phone on August 26. "But it appears
most of the resources have been committed already so in that respect
companies do find it more and more difficult to get additional money.”
Lots of other Russian companies want
access to the €65 billion fund because they have been squeezed by the
fall of the ruble and face growing difficulties in accessing western
markets, following Western sanctions against Russia for the annexation
of Crimea and its role in Eastern Ukraine.
"One thing is the Russian sanctions but
the other thing, very important, is actually the economic situation in a
sense that Russia like Brazil, for example, remains in a recession,”
Smolyaninov said, adding that there are no signs that Russia will emerge
from recession anytime soon.
In that respect Russian companies do not
require more financing because their projects are going to be postponed
because there is no demand, he said. Moreover, the cost of funding and
priorities for the government have shifted from development into
survival so it makes sense that the government has turned down the
requests from Rosneft, Smolyaninov said.
Ulyukayev told journalists during a visit
to Malaysia that "there is a decision” not to provide funds from the
National Welfare Fund to four Rosneft projects. The Russian government’s
decision is a blow to Rosneft’s ambitious plans of doubling its oil and
gas production within 20 years.
In 2014, Rosneft asked for more than $40
billion in support from the NWF, but later trimmed its request to just
five projects requiring 301 billion rubles ($4.3 billion) of state
financing.
Rosneft can still be looking for funding
through international partnerships. However, Smolyaninov told New Europe
that for most of the Russian companies the Western markets remain
closed, especially for Rosneft.
The ruble on August 24 slid 2.3% to more
than 70 per dollar. Moreover, low oil prices are undermining the
economics of some of Rosneft’s projects and western sanctions complicate
Rosneft’s ability to finance them. Rosneft CEO Igor Sechin said earlier
in August that it would shift its focus to increasing production at
existing fields.
"The government and financial authorities
in Russia and in other emerging markets are feeling increasingly nervous
about their national currencies depreciating rapidly,” the BCS analyst
said. However, Smolyaninov added that Russia has been in that difficult
situation for more than a year already and in a way it is better
accustomed than some of the other emerging markets.
The decision not to finance Rosneft’s
projects also comes at a time of uncertainty in Moscow after the
replacement of Russian Railways chief Vladimir Yakunin, an ally of
Russian President Vladimir Putin, triggered expectations of a broader
reshuffle among the Russian elites, including Sechin.
http://www.neurope.eu/article/falling-oil-prices-force-russia-to-shelve-rosneft-projects/