“I have a plan. We should sell to the Chinese and stick it to BP.”
Russian president Vladimir Putin talks with Rosneft CEO Igor Sechin. BP
recommended Russia not open more of its shares to the market, but
Russia is now courting the Chinese for a position in the company. (Photo
by MAXIM SHEMETOV/AFP/Getty Images)
Anyday now we will hear that all that metal China is mining isn’t
really designed for job creation and dumping steel into the world, it’s
for building oil storage tanks. With a world awash in crude, China’s
state owned oil giant CNPC is looking to become a major shareholder in
Rosneft
to have access to more of it. For those who don’t know, Rosneft is
Russia’s biggest oil producer. The company had a joint venture with
ExxonMobil XOM -0.01% a while back in the Kara Sea, but
Washington put a stop to it because of sanctions in retaliation for Russian involvement in Ukrainian politics.
Meanwhile, the Chinese are hoping to bankroll the Russian company as
it opens more of its shares to the market. Ironically, Rosneft will go
from being a majority Russian state owned enterprise to a majority
Russia and Chinese owned one.
Russia’s First Deputy
Energy Minister Alexei Teksler said China’s National Petroleum Corporation (CNPC) was interested in Russia’s privatization plan.
China said the same. “Yes, we are considering this,” CNPC’s Wang
Zhongcai reportedly said, adding that the company is conducting their
due diligence on the deal.
Under the state privatization plan, Rosneft is expected to privatize
19.5% of its state shares this year. The Russian government currently
owns 69.5% of Rosneft, with the rest of the shares free-floating in the
market.
Vladimir Putin
has stated numerous times that he was continuing with privatization
plans of beloved state assets, a process that has largely stalled since
he took over the government nearly a decade ago. He warned in 2014 and
again in 2015 that selling oil assets when prices were depressed
wouldn’t be prudent. Oil prices remain in the low $40s per barrel, but
Rosneft shares are doing well. The Micex traded shares are up 27%
year-to-date, beating the forex which has the dollar down nearly 10%.
