Putin picks Rosneft man for energy post

Reuters News
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Posted: Mar 22, 2012 12:49 PM
Putin picks Rosneft man for energy post

By Melissa Akin and Olesya Astakhova

MOSCOW (Reuters) - Vladimir Putin on Thursday made his first energy appointment since his re-election as Russian president, naming Rosneft first vice president Pavel Fedorov a deputy energy minister.

Fedorov, a former Morgan Stanley banker who helped negotiate a landmark Arctic drilling deal with U.S. ExxonMobil during his tenure at the state oil firm, is expected to oversee efforts to pull foreign investment into the energy sector.

Putin, who won the March 4 election and will serve as premier until his May inauguration, this month issued an order increasing the number of deputy energy ministers from six to seven to make way for Fedorov, two government sources said.

A Reuters report on Thursday that Fedorov would move to the energy ministry, citing a government source, was later confirmed by the government and by Rosneft, which said his duties would be reassigned to other senior managers.

Two weeks into the transition, there is little clarity about the shape of the new government, expected to be led by outgoing President Dmitry Medvedev, who announced last September that he and Putin had agreed to swap jobs.

Oil industry watchers expect Putin's energy tsar, Deputy Prime Minister Igor Sechin, to remain the ultimate authority on Russia's natural resources industries, though it is uncertain he will retain his formal post in a new government.

Longtime Putin ally Sechin, who hand-picked Fedorov for a top management job at Rosneft when he was serving as chairman, already had substantial influence over the oil industry as a top Kremlin lieutenant during Putin's first two terms as president.

"Sechin will still be around long after I'm dead and buried," another government official said.

EXXON DEAL ALMOST DONE

Russia's oil industry made a spectacular recovery from its post-Soviet malaise by modernizing production at giant Soviet-era fields in Western Siberia.

But Russia, which depends on the energy industry for more than half its state revenue, now has little to no spare capacity, unlike Saudi Arabia, its rival for the title of top producer, and is struggling to coax new oil out of the ground.

While Rosneft boasts 25 years of oil and gas reserves at current rates of production - the most of any listed oil company in the world - much of that is located in remote, inhospitable territory.

Technology, expertise and capital are needed to develop them efficiently, with Arctic offshore zones presenting the greatest challenge. State companies enjoy a monopoly on offshore oil exploration in Russia, although its competitors are lobbying for access.

Initial outlays on Exxon's Arctic deal with Rosneft, due to be finalized next month pending tax changes to ease the huge cost of development, are estimated at $3.2 billion.

The eventual cost of developing the project could run into the tens or even hundreds of billions of dollars.

Fedorov is expected to retain a hand in execution of the deal in his new post. A spokeswoman for ExxonMobil's Moscow office declined to comment.

Their joint venture is starting seismic studies of the three tracts, in the Kara Sea, near the Arctic island of Novaya Zemlya, this year.

(Additional reporting by Darya Korsunskaya and Douglas Busvine; Editing by Douglas Busvine)