Rosneft Rushes to Repay Loans

By Ivan Shlygin, April 19, 2014

to build an LNG plant, as well as the lessees with at least 50-percent state ownership, developing offshore fields within internal maritime waters, territorial sea and on the continental shelf (including the Black and Azov Seas). 

Taking advantage of this opportunity, Rosneft and its U.S. partner, ExxonMobil, have already selected contractors to design the first stage of the project to build an LNG plant on Sakhalin. Construction will start in the first half of 2015, with the plant slated for commissioning in 2018. The project cost is estimated at $15 billion. The plant’s initial processing capacity will be 5 million tons of LNG per annum, with a possibility to boost it in the future. The facility will process natural gas produced at Rosneft’s fields in the Far East and from Sakhalin-based gas resources. The sales will target the Asia-Pacific region, especially Japan and China. 

Hard Currency for State Coffers

Russia’s federal budget substantially depends on Rosneft’s export revenues – last year the company became the country’s biggest taxpayer, contributing 2.72 trillion rubles to state coffers. This year, according to Sechin, Rosneft’s tax payments will top 3 trillion rubles. Prior to 2013, Gazprom was the longtime taxpaying leader, paying 1.9 trillion rubles in taxes in 2012 against Rosneft’s payments of 1.7 trillion rubles. 

The Rosneft chief denies that his company is competing with Gazprom, but the facts suggest otherwise. A report by Sweden’s Lundin Petroleum said that in the first half of 2014 Rosneft might close the deal on acquiring 51 percent in Petroresurs, the owner of an exploration license for Lagansky block in the Caspian. The block includes Laganskaya, Morskaya and Petrovskaya areas, with total recoverable resources of 110-450 million tons of oil, according to Lundin Petroleum’s estimates from 2008). The Swedish company heralded the impending deal in early October 2013. Lundin Petroleum is a co-owner of Petroresurs with a 70-percent share, while the remaining 30 percent is held by Gunvor. Gazprom did have the opportunity to buy the controlling stake in the project, but decided to pass up on it, and Rosneft eventually bought into Petroresurs.

Getting back to the issue of oil supply, we recall the efforts of Igor Sechin to make Rosneft the sole crude supplier to Belarus via the status of “special importer.” The initiative produced mixed reactions: Belarus President Alexander Lukashenko welcomed it last September, but it irked LUKOIL President Vagit Alekperov (read more in OGE October 2013 issue).

Unrest in Ukraine puts a question mark on Rosneft’s relaunch of the Lisichansk refinery in July. In spring 2012, TNK-BP halted the plant’s operation. Earlier, Sechin was quoted as saying that the Lisichansk refinery was old, almost non-operative and required substantial investment for putting it back into order. The plant in Lisichansk is Ukraine’s second-largest refinery, it can refine up to 16 million tons of crude per annum.

According to Gazprombank analysts, this year’s average 25-percent increase of Rosneft’s capital investments to 700 billion rubles is due to the rollover of last year’s projects into 2014.