Russian Oil and Gas in 2030

Oil trader Gennady TimchenkoThe once all-powerful Russian energy sector appears to be on unpredictable and shaky grounds

Investment projections on the Russian energy sector over the past few years have changed numerous times, giving an impression that there is no clear vision in the minds of policy makers in Moscow as to where the energy sector is headed. The depletion of Western Siberian gas fields for example, is not a surprise – it has been known for at least a decade – yet Gazprom refused to act on information its own analysts were reporting to senior management, writes Roman Kupchinsky on The Jamestown Foundation’s Eurasia Daily Monitor.

The widespread impression in the West – as well as among many experts in Russia – is that such giant Russian energy companies as Gazprom, Gazpromneft, Surgutneftegaz and Rosneft are managed by hidden owners who operate as proxies for high level personalities in the Kremlin. The veracity of these claims might prove difficult to establish in court, but the opacity permeating much of the operations of these companies does little to dispel doubts among investors.

It is not inconceivable that the real reason for the chaos in Russia might well be concealed within the Kremlin. In June, Volga Resources, the Luxembourg-based fund owned by Gennady Timchenko, reputedly a long-time colleague of Russian Prime Minister Vladimir Putin, purchased an 18.2 percent stake in Novatek, Russia’s largest private gas producer. Gazprom, incidentally, owns a 19 percent share in Novatek, which in theory means that the pro-Kremlin Gazprom-Timchenko group owns a 37.2 percent stake in Novatek.

Novatek also said on June 9 that it would acquire a 51 percent stake in Yamal LNG, the operator of the large South-Tambeyskoye gas condensate field, from companies affiliated with Volga Resources. Despite a Volga spokesman’s statement quoted by Russian news agencies, that the two deals were not related, Moscow-based KIT Finance said that these two consecutive deals looked like an asset swap, whereby “Timchenko has exchanged the upstream asset (Yamal LNG) for the stake in Novatek.”

It is possible that Timchenko, through his contacts with Putin, was fully briefed on the coming investments into the gas sector and saw the Novatek transaction as another opportunity to get on board for what might be a highly profitable deal. The constant gyrations of Russia’s energy investment strategy do not bode well for European or Asian energy security. It creates a high level of anxiety among consumers in the post-recession world economy. The identity of the beneficiaries behind such deals needs to be transparent not only in the case of the Timchenko-Novatek deal, but for the entire Russian energy investment program.

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