Rosneft may get $40bn ‘get out of debt free’ check from Kremlin
The country’s largest crude producer may receive up to $40.6 billion (1.5 trillion rubles) in assistance from Russia’s National Welfare Fund.
“This figure only looks imposing, but everything doesn’t have to be done in one year,” Medvedev said in an interview with Vedomosti published Monday.
The National Welfare Fund has reserves of $83 billion, and is mostly financed from oil taxes. Up to 60 percent of the fund can be allocated to domestic investment.
Earlier, Russia’s Economy Minister Aleksey Ulyukaev said Rosneft will receive an injection of state cash, but not specifically the $40 billion requested.
Rosneft’s CEO Igor Sechin asked the National Wealth Fund for financial aid in August after his company was put on the US sanction list, blocking it from long-term borrowing on the debt markets. The EU is expected to impose similar borrowing limits on the company.
“The company needs to keep up production, since Rosneft is a major contributor to the budget. In this regard, we have to help it by maintaining the investment level,” Medvedev explained, adding that the government is considering specific ways of aiding Rosneft.
The US sanctions have blocked a number of other Russian oil and gas companies, as well as banking institutions, from Western funding.
The oil company - the largest listed worldwide - accounts for 40 percent of Russian oil output, and about 5 percent of global oil production. Oil and gas revenues account for more than 50 percent of Russia’s national budget.
“Rosneft is a major source of tax revenue. As such, we should help it maintain its level of investment. We are now considering specific variables and types of support,” Medvedev added.
In March 2013 Rosneft acquired BP-TNK in a $55 billion deal, most of which was financed with new debt, leaving little liquidity for new projects.
“I have no doubts about the company’s performance in the medium to long-term. The investment will certainly pay off,” Medvedev said.
Prepayment from China for future oil supplies will also be a source of capital for the company. In 2013, the company signed a $270 billion deal to supply China National Petroleum Group with crude over the next 25 years.