China’s CNPC has expressed the desire to participate in the management of “Rosneft”


China national petroleum Corporation (CNPC) is interested in increasing stake in Rosneft subject to participation in the management of the company. The Chairman of the Board of Directors of CNPC Wang Yilin said in an interview with TV channel “Russia 24”.

“In the case of increasing the would like to have the right to participate in the management of the company, of course, in full accordance with the acquired shares. Again, we expect that the format of participation and scope of authority will be reflected in the offer “Rosneft”, — said a top Manager.

Interest CNPC was confirmed by the Minister of energy Alexander Novak. “It was declared, shall we say, interest in this issue,” the Minister said, is not becoming to reveal details of a possible deal.

Strategic partner

According to the CNPC, the Chinese company will consider in detail the proposal for participation in the privatization of Rosneft, if it comes from the Russian authorities. The partnership with Rosneft to CNPC has strategic character and is an important element of cooperation between the two countries, he explained.

CNPC became a shareholder of “Rosneft” during IPO the Russian company in the summer of 2006. The Chinese company acquired the shares of “Rosneft” on $500 million, or 0.62%.

The government of Russia until the end of 2016 plans to privatize 19.5% of Rosneft. The Minister of economic development Alexei Ulyukayev said on 24 may that without this transaction it is impossible to fulfil the Federal budget for this year with a deficit of 3%. The consultant of the transaction will be the Italian Bank Intesa Sanpaolo. As of 14:10 MSK, 19.5% of “Rosneft” on the Moscow stock exchange cost of 664 billion rubles.

Assistant to the President of Russia and Chairman of the Board of Directors of “Rosneft” Andrei Belousov said that he considered the main option for privatization of the company the sale of 19.5% stake to a strategic investor. This will allow you to get the maximum bonus from the sale, he explained.

As you can manage “Rosneft”

In the Russian office of CNPC was unable to immediately explain what participation in the management of “Rosneft” can be discussed.

The Board of Directors of “Rosneft” nine people. Seven of them — candidates from the government: Chairman of the Board of the company Igor Sechin, presidential aide Andrei Belousov, the Chairman of the Board of Gazprombank Andrey Akimov, Russian energy Minister Alexander Novak, managing Director of Nord-Stream AG Mattias Varning, former Advisor to Morgan Stanley in Russia, Oleg Vyugin, former Vice-President of ExxonMobil Donald Humphreys. Two other Directors nominated by BP: BP CEO Robert Dudley and President of the company in Brazil, Uruguay, Venezuela and Colombia Guillermo Quintero.

In 2013, the Board of Directors of “Rosneft” may not impose on the shareholders several key issues without the approval of the representatives of BP. Adopted in June 2013 amendments to the articles of Association require the approval of eight of the nine members of the Board of Directors questions about the company’s reorganization, the increase in the authorised capital and major transactions. The amendments were adopted after the purchase of Rosneft assets TNK-BP and the increase in the share of BP in Rosneft from 1.25 to 19.75%. Prior to this transaction, for the rendering of most questions at the shareholders ‘ meeting was enough of a majority vote of the Council.

Managing partner law office “Yushin and partners” Anatoly Yushin says that shareholder with a share of 2 to 10% have the opportunity to nominate at least one candidate to the Board of Directors of the company and to secure his election. CNPC will also be able to nominate representatives to the audit, the audit Commission and the management Board of the company, as well as to the position of Chairman of its Board, but without a guarantee the election of their candidate, said the lawyer.

When the package from 10% of the shares of a shareholder will have the right to convene an extraordinary meeting of shareholders, to audit financial-economic activities of the company and to put the issue of early re-election of members of the Board of Directors, continues Yushin. Guaranteed to elect their representative to the Board of Directors of CNPC will be able, if will own 11.1%, and the proportion over 20% chances to get two seats on the Council.

If CNPC will buy all of 19.5% of “Rosneft”, will be able through their representatives in the Board of Directors of the company to appoint at least two members of the Board, considers the BGP Litigation lawyer Denis Duraskin. According to him, other rights to participate in management of “Rosneft”, Russian legislation and the Charter of the company for the owner of 19.5% of the shares do not provide, but they are possible when the shareholder agreement between the “Rosneftegaz” and CNPC. This agreement may provide for joint action by two shareholders in the voting at meetings of the Board of Directors or the Board.

There is a risk that the new shareholder will be coordinated with BP on the management of “Rosneft”, but in the case of CNPC, this probability is lower than if the buyer was a company or Fund from the EU or the US, says Duraskin.

According to the analyst of Sberbank CIB Valery Nesterov, Western investors are unlikely to take part in privatisation “Rosneft” because of existing sanctions against Russia, a major potential buyers — Asia investment funds or the company. Among possible investors it calls China’s CNPC, India’s ONGC and Malaysia’s Petronas. The competition between them will help the government to sell the more expensive asset, but to say more will be possible only after the government will create the conditions of sale.

Nesterov considers that the package of 19.5% will be divided into two or more parts. In his opinion, it will protect “Rosneft” from the new strategist, the potential to obtain a blocking stake in the company.

Offshore interest

CNPC is interested in the development of shelf of Russia and carries on negotiations with “Rosneft” and “Gazprom oil”, but proposed terms of cooperation is too risky, said Wang Yilin.

Earlier, Deputy Prime Minister Arkady Dvorkovich said that Russia is ready to consider providing Chinese companies with shares over 50% in projects for development of oil and gas fields, in addition to offshore projects, where it can be given a minority share. The head of “Rosneft” Igor Sechin said that the Russian company is discussing with its Chinese partners to questions concerning the exchange of assets.

The proposed projects are at a very early stage of implementation and require considerable investment, which at current oil prices appear to be risky, said the head of the CNPC. According to him, unhappy in Beijing and restrictions for foreigners in the management of offshore projects.

Rosneft offers CNPC joint development of stations on the continental shelf of the Barents and Pechora seas. “Gazprom Neft” in December last year signed a Memorandum of understanding with CNPC in the oil sector. The document provides for cooperation of the parties for the exploration and production of oil in Russia, including the Arctic shelf.