THE NEW RUSSIAN EMPIRE
Lord Browne, the former BP chief executive, plans to exploit the collapse in oil prices to build a major new company using $10bn of Russian cash.
John Browne, who was appointed executive chairman of the oligarch-backed L1 Energy group last week, is scouring the industry to snap up assets at knock-down prices, said friends, who added that few outside observers have realised the huge ambitions Browne has to create a major global force in energy.
The man once dubbed the Sun King for his pre-eminence in the oil sector and who celebrated his 67th birthday last month, is said to be "enormously excited" about building a fossil-fuel business from almost scratch.
The venture will be based at first in Hamburg, where Browne was born into a British military family, but will focus future interests on North America and the Far East using debt and equity from the Russians.
Hamburg is home to the DEA oil company, recently bought for $7bn by L1 Energy from the German utility RWE. The Russians are expected to use DEA as a vehicle to build a much wider energy asset portfolio.
Approval of L1 Energy's purchase of DEA has been received from eight national and supranational authorities, including the European Union, Germany and Ukraine. The UK is the only government to oppose the transaction formally.
Ed Davey, the UK energy secretary, is concerned about the potential for DEA's North Sea production to be affected by future sanctions against Russia.
However, Browne is confident that a legal structure is in place that would avoid North Sea fields being affected by any further deterioration in relations between the Kremlin and the west.
Further major acquisitions are expected from L1, which is formally owned by the LetterOne holding group which was and controlled by Mikhail Fridman and other Russian oligarchs. There is already the prospect of L1 working with BP in a joint investment on a West Nile Delta project in Egypt.
Browne is clearing the decks to focus on his new venture. He has given up his chairmanship of the Riverstone private equity group and a similar post at British shale gas pioneer, Cuadrilla Resources.
On 1 January, Browne opted to end his role as the government's lead non-executive director. He was said to have transformed governance across Whitehall, bringing a more strategic and commercial focus to civil service activities.
He has also established – and become a spokesman for – the Glass Closet, an organisation established to campaign on gay and lesbian issues, particularly in the workplace. Browne is still chair of the Tate art gallery in London.
LetterOne, was set up by Fridman and co-investor German Khan two years ago to invest part of the $14bn they gained from selling a stake in the Moscow-based TNK-BP oil venture.
That joint venture was formed by Lord Browne and Fridman in 2003 but was bought by the Russian state-owned oil group Rosneft. BP received cash but also now holds a 20% in Rosneft.
Browne and Fridman had a bust-up previously, when one of the Russian's firms bought the assets of Chernogorneft, a Siberian oil company which had been declared bankrupt.
Chernogorneft had previously belonged to Sidanco, a Russian oil producer in which BP held a major stake. At one stage, BP asked Tony Blair to write to Vladimir Putin to pressurise the Russian leader to ensure that British interests in Chernogorneft were safeguarded.
However, Browne now speaks highly of Fridman, writing in his Beyond Business memoir: "Fridman was a superb negotiator. He would give you the feeling that he would rather forfeit everything than give up on a single crucial point. He was extremely focused on business."
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EIA - Brent crude oil spot prices averaged $79 per barrel (b) in September, up $6/b from August. EIA expects Brent spot prices will average $74/b in 2018 and $75/b in 2019. EIA expects West Texas Intermediate (WTI) crude oil prices will average about $6/b lower than Brent prices in 2018 and in 2019.