Chinese conglomerate eyes Rosneft investment

CEFC China Energy is in talks to make an investment in Russia's state-controlled oil company Rosneft, in what would be a sign of strengthening economic co-operation between Moscow and Beijing even as relations with the US deteriorate.

CEFC, a private conglomerate with interests in the energy and financial services industries, has been negotiating a deal to invest in the world's largest publicly listed oil producer that could be announced as soon as this week, according to four people with knowledge of the talks.
If agreed, the complex deal would mark a growing corporate relationship between China and Russia that has focused on cross-border energy deals. This has strengthened this year against the backdrop of increasingly acrimonious ties between Moscow and the west, involving sanctions levied against major Russian companies including Rosneft.
"Rosneft sees this as a good idea for both strategic and simple business reasons. With the current tensions with the US, they can use it to show that there are other places to find friends. And it shows pragmatism in terms of taking the money where it is available," said one of the people, who was not permitted to speak to the media.
As part of the talks, CEFC is in discussions with independent Russian oil company NNK, headed by former Rosneft chief executive Eduard Khudainatov, to form a joint venture related to the investment, three of the people told the FT on condition of anonymity.

Still not ready

Rosneft and CEFC had hoped to announce the deal as early as this week, the people said, adding that its complexity could mean it is delayed or even falls through. They said the Russian company was keen to reach an agreement during an economic summit this week in Vladivostok, on Russia's far-east coast, which Moscow is seeking to use as a showcase for its expanding Asian relationships.
Igor Sechin, Rosneft's chief executive, told reporters that they "should ask them the question," when asked this week if the company could gain new shareholders. CEFC declined to comment, while NNK did not respond to a request for comment.
Britain's BP holds a 19.75 per cent share in Rosneft, while 19.5 per cent is held by QHG, a holding company controlled by the Qatar Investment Authority (QIA) and commodity trader Glencore. The Russian state holds a 51 per cent controlling stake in the company. Glencore and QIA declined to comment.
Rosneft and CEFC in July have already signed a strategic co-operation agreement to explore the opportunity to work on exploration, production, refining and trading together, and said that the Chinese group could invest in the Russian company's retail business.

Joint exploration

This week the two companies signed a more detailed agreement on joint exploration projects in Russia's Siberia region, and a contract to increase crude supplies to China. Mr Sechin said the company's priorities "include strengthening the relations with the Asia Pacific countries and, in particular, with China".
Two months ago Rosneft sold a stake in an oilfield to another Chinese group, while Gazprom, Russia's state-owned gas monopoly, is building a 4,000km gas pipeline to China to further deepen the two countries' energy ties.
"In terms of their image it is a good idea to demonstrate newfound desire to look international, even if the reality is quite different," said the person with knowledge of the talks.
Russian newspaper Vedomosti, which first reported the talks, said last month that NNK might inject assets into the JV, while CEFC would provide cash.
Copyright The Financial Times Limited 2017