ROSNEFT REDUCES PLANS
The Russian government has decided not to fund four out of five Rosneft projects for which the oil company had requested financing from the sovereign wealth fund, the economy minister said on Monday.
Alexei 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 fall in the rouble and closure of western capital markets to Russian companies has triggered a scramble to secure financing from the $75bn fund, which supports the country's pension system.
Rosneft last year asked for more than $40bn in support from the NWF, but later trimmed its request to just five projects requiring Rbs301bn ($4.3bn) of state financing.
The decision to refuse all but one project reflects the growing pressure on Russian government resources as oil prices slide to six-year lows. Russian business daily Vedomosti earlier this month quoted a government official saying that the NWF should be preserved as a "piggy-bank in the event of a crisis".
The rouble on Monday slid 2.3 per cent to more than 70 per dollar, approaching the record low it set last December.
The decision will be a further blow to Rosneft's ambitious growth plans. Following a spate of acquisitions culminating in the $55bn purchase of TNK-BP in 2013, the company last year unveiled a target of doubling oil and gas production within 20 years, largely through new projects.
However, with low oil prices undermining the economics of some of those projects and western sanctions complicating Rosneft's ability to finance them, the company has retrenched. Igor Sechin, chief executive, said earlier this month that it would shift its focus to increasing production at existing fields — a tacit admission that many projects may have to be delayed or scrapped.
The decision also comes at a time of uncertainty in Moscow after the replacement of Vladimir Yakunin, the powerful head of Russian Railways, triggered expectations of a broader reshuffle among the Russian elites. Vladimir Putin publicly criticised Mr Sechin, a long-time ally of the president, for his expansive requests for government funding at a meeting in February.
Rosneft's slimmed-down application proposed that the government fund just five projects: the Russkoye and Yurubcheno-Tokhomskoye oilfields, the Rospan gas project, the Angarsk petrochemical plant and the Zvezda shipyard.
Mr Ulyukayev said the shipyard — for which Rosneft had requested Rbs89bn — could yet receive government funds, as long as Russian oil companies placed advance orders from it: "If they do, then it is clear that then it will make sense to invest."
Rosneft said in April that funding from the NWF was just "one possible source of financing for its projects". In an interview with Russian state TV in June, Mr Sechin said Rosneft understood "that in times of crisis, we probably should not expect a significant amount of these funds [NWF financing]".
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