Gazprom was Russia's main political and energy tool until Rosneft recently took over, expert says
Rosneft has become an important political and energy instrument for the Kremlin with the leading role it has recently played in Russia's energy deals with China, according to Volkan Ozdemir, head of the Institute for Energy Markets and Policies on Friday.
Ozdemir told Anadolu Agency that Russia's gas giant Gazprom was the country's main political and energy instrument until Rosneft took over.
He explained that China and Russia's energy cooperation, which has increased in recent years, is motivated by political and economic reasons.
The markets are shifting towards the Asia-Pacific region where China's energy needs are increasing, he said.
"This also has a political aspect, which is a concrete indicator of Russia's structural orientation towards the east. For many years, Gazprom came to mind in Russia's energy markets, but now Rosneft started to participate. From Russia's point of view, Rosneft is not only the biggest company but also the biggest foreign policy instrument," Ozdemir affirmed.
Rosneft, whose market value has surpassed that of Gazprom, has taken a different stance than Gazprom by deciding to orientate the company towards the east.
Ten years ago, Russia was incorporated into the global economy by exporting energy and raw materials mainly to Europe, however, now the tables have turned and Asian markets are gradually becoming the most attractive destinations for Russian exports, he said.
"This step was taken in accordance with the concept of Greater Eurasian Partnership - a balanced market share between east and west," Ozdemir noted detailing that the material basis of this balance also involves energy.
"The increasing share of eastern markets is also showing this. Rosneft is the company that attracts the most attention in this development. Rosneft is now an important political instrument for the Kremlin," he said.
Agreements with the Iraqi Kurdish Regional Government (KRG), deals with Venezuela and increasing relations with China all show Rosneft's importance in the field of politics and energy, he added.
According to Ozdemir, the balance is seen in the structure of the company, "as in addition to the U.K.'s BP and the Investment Fund of Qatar, the Chinese CEFC [China Energy Company Limited] is also one of the owners of Russia's national champion Rosneft."
Rosneft earlier announced that the company would cooperate with the KRG in five oil production blocks in northern Iraq with an investment of up to $400 million.
Furthermore, the two sides announced the start of an infrastructure project for the operation of an oil pipeline in the KRG at the end of October.
- Gazprom's monopoly to be removed
In September, the consortium controlled by Glencore and Qatar Investment Authority concluded an agreement with CEFC in which they sold a 14.6 percent stake in Rosneft for $9.1 billion.
He stressed that CEFC may buy 49 percent of Rosneft's largest gas field from a Rosneft subsidiary, Rospan International.
"If Rosneft sells this stake to CEFC, it may break Gazprom's export monopoly since the field could be used as one of the resource bases for the Power of Siberia pipeline in the future," he said.
Rospan International is one of Rosneft's key gas assets. Currently, the subsidiary has a license for exploration and production in three fields.
Aggregate hydrocarbon reserves of the three fields amount to about 1 trillion cubic meters of natural gas, 150 million metric tons of gas condensate and 46 million metric tons of oil.
According to Rosneft, in the near-term, the subsidiary will become a major natural gas production hub for the company in the Yamal-Nenets Autonomous Region.
This is in line with Rosneft's gas business development strategy, according to which the company plans to become a leader among independent gas producers by 2020, delivering annual production of 100 billion cubic meters.
"If Rosneft sells this stake to the Chinese company, it will be a sign, which shows that Rosneft wants to be active near the Power of Siberia natural gas pipeline," Ozdemir said.
China and Russia signed a $400 billion deal in May 2014 to transfer 38 billion cubic meters of Russian gas per year to China through the Power of Siberia.
"We can say with Rosneft's move that Gazprom's gas export monopoly on piped gas could be removed as by 2020 the Power of Siberia will be active," he said.
He further confirmed on Nov. 19 that CEFC and Rosneft signed a deal for oil supplies, strengthening Russia's presence in the world's largest energy consuming country.
The deal stipulates that Rosneft will supply China with up to 60.8 million tons of oil in total over the next five years starting from 2018.
By Murat Temizer