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№ 4 (April 2011)

Where Have All the Oil Men Gone? Wherever They Went, They’re Not in Top Management

   Common sense in Russia says that if Russian Deputy Prime Minister Igor Sechin resigns as chair of the Rosneft board of directors, the company will loose a very powerful political heavy-weight.

By Alexander Bratersky

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   But oil industry professionals see things differently: many oil and gas companies in Russia are presided over or chaired by political figures, not oilmen and this, the oilmen say, harms the industry’s overall performance.

   “There too many political appointees and because of them it we don’t calculate oil production correctly and don’t drill for oil in the right places. I think this situation will come back to haunt us someday,” one former Russian oil company executive requesting to remain anonymous in order not to harm his ties with industry bureaucrats, told Oil and Gas Eurasia.

   Sechin, a military translator by background who worked in senior positions in Vladimir Putin’s presidential administration is expected to leave his chair at Rosneft as a part of current Russian President Dmitry Medvedev’s attempts to ease the grip politics has on state-owned corporations.

   Many industry observers note that leading energy industry institutions are presided over by bureaucrats who have no background or experience in the industry.

   Gazprom is chaired by Alexei Miller, an economist by trade. The Energy Ministry which oversees the sector, is headed by Sergei Shmatko whose career path included a stint as an auditor in a German company and a post in a state company which  built nuclear power plants abroad.

   Former Prime Minister Mikhail Kasyanov said in the book he published in 2009 that Putin took Miller from St. Petersburg, because of his personal loyalty. “He was not ready to run such a big and serious company as Gazprom,” Kasyanov said commenting on Miller’s political appointment at Gazprom. Miller replaced the industry heavyweight Rem Vyakhyrev.

   Boris Nemtsov, a former deputy prime-minister in mid-1990s, said that in the current political environment Putin prefers political appointees. According to Nemtsov,  “His (Putin’s) aim is not to develop business, but to put his people in place running companies. He doesn’t need professionals, just men he can trust.”
Nemstov said that when he was a political  appointee at the helm of the Fuel and Energy Ministry for a brief time in 1997, he relied on his deputies who were “economists and energy professionals.”

   In Soviet times, no one could possibly become the head of the energy ministry head with no ties to the industry, several industry experts who worked during that era said. Soviet oil and gas minister Valentin Shashin who served on his post in mid 1960s until the end of the 1970s spent his entire career in oil and gas.

   Today only one MP in the Russian parliamentary energy committee in the state Duma is the graduate of an oil and gas university. All the other MPs on the commitee, including the chairman have backgrounds in math, economy or even aviation.

   Irina Shavinskaya, a  recruitment expert with Consort Consulting Group told Oil and Gas Eurasia that leadership skills and “connections within the apparatus” are more important than a professional background in terms of getting a position in a Russian ministy.

   Shavinskaya, who calls Anatoly Chubais a successful manager of the now-defunct RAO Energy, added that, overall, Russian officials working in the oil industry are “behind their foreign colleagues”.

   Some experts argue that although the trend to install political appointees to oversee the energy sector is in fact evident in Russia, the country is merely following the trend set in the United States which also puts oil outsiders in charge of affairs.

   The post of Secretary of Energy was established in 1977 by the Jimmy Carter administration and was chaired by James R. Schlesinger, an economist and a former Secretary of Defence. No subsequent energy secretary has had a background in energy either.

   George W. Bush’s nomination of Samuel Bodman as Secretary of Energy in 2004 provoked serious consternation among energy experts who said that Bodman lacked knowledge of the industry. Bodman himself told reporters that the job “in many ways combines all aspects of my life’s professional work.” He was apparently referring to his early work as a teacher of chemical engineering in MIT and his work for several chemical companies.

   While the political factor remains a priority in finding the right man to handle the job in the ministry or a connected agency, finding quality personnel is a hard task.

   Igor Yurgens, the head of the INSOR think-tank whose board of trusties is chaired by President Medvedev, said that the critical situation with experienced energy professional might force state-owned oil companies to find them abroad. “Twenty years of de-industrialisation left us with no choice,” he said.

   Most students who want to pursue careers in the oil industry are motivated by the financial benefits alone: “They have heard the world “oil” and their eyes go wide,” said Valentin Belkov, a dean of of the transport, oil and gas faculty at Omsk state university.

   His words were echoed by a 2009 survey of 900 Higher School of Economics students who named Gazprom and the presidential administration among the 30 most prestigious companies in which they might seek to work.

   Still, having a job in a prestigious company is often not the measure of a good resume, but of powerful connections. “We had a guy who was a former DJ and he was put in charge of the department. But I would say that in general to be an effective manager, you don’t need to be an atomic industry expert,” a former employer of the company, which is affiliated with the Rosatom atomic agency, said.

   Shavinskaya concured that it is indeed difficult to find technical experts. She said that Russian educational standards cannot be compared with the international ones in the area.

   “As a result, our students become lower level specialists whose qualification is not up to the international standards,” she said.

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