Sechin prepares "basket" for Mikhelson
How does the owner of NOVATEK, Leonid Mikhelson, manage to manipulate top officials and increase his fortune?
It’s a common knowledge that Mr. Mikhelson never says "no". And he is always looking for a compromise, unlike his permanent, hot-tempered opponent, Head of Rosneft Igor Sechin. The Head of Rosneft can also file a lawsuit, if we recall the unenviable fate of Minister Ulyukayev. And Mikhelson, with his ostentatious calm, steady business and his own gas tankers, is a very strong irritant for Mr. Sechin.
And here's some more news: the Russian company Sovcomflot and Mitsui OSK Line (MOL, Japan) may get a contract for gas tankers for NOVATEK's Arctic LNG-2 project at Asian shipyards.
Sovcomflot has already confirmed its plans to participate in the competition. Russian shipping company and Japanese MOL can share the order. At the same time, the number of vessels under the contract decreased from 10 to 6 due to the postponement of the commissioning of another NOVATEK project - Ob LNG. Gas tankers will be built at one of the foreign shipyards, such as at the Hudong shipyard in China or at DSME, Samsung and Hyundai (Korea).
This news is probably a knife to the heart of Mr. Sechin, who dreams that all gas tankers will certainly be built only at Rosneft's Zvezda shipyard in Primorye.
What steps can be taken to prevent Mikhelson and his NOVATEK from reaching the finish line?
The correspondent of The Moscow Post investigated these intricacies The Moscow Post.
45 gas tankers - not the limit?
It should be noted that the Japanese MOL, together with the Chinese COSCO, is already a co-owner of three Arc7 LNG tankers for the Yamal LNG project — these vessels are: Vladimir Vize, Vladimir Rusanov and Nikolay Urvantsev. Sovcomflot has a brand-new tanker Christophe de Margerie for Yamal LNG.
NOVATEK is likely to diversify the structure of ship owners, meaning that contracts can be concluded with both Sovcomflot and Japanese MOL.
Let us recall that for the Arctic LNG2 project, it is promised to build 15 Arc7 gas takers at the Zvezda shipyard. But the company asked Vladimir Putin to allow the construction of 10 more gas tankers abroad, since the Zvezda shipyard clearly will not have time to build all the vessels on time.
Mr. Mikhelson needs these gas tankers by 2023-2024 to export gas from Ob LNG. NOVATEK was ready to load the Zvezda plant with an order for another 20 gas tankers by 2030.
In total, it turns out that Mikhelson eventually needs 45 such vessels, doesn't he?
If the fleet is owned by both Russian and Japanese companies, the question arises: what flag will the tanker fly? Gas transportation along the Northern Sea Route and coasting by foreign-flagged vessels are already formally prohibited. But let us remind, that in the case of Yamal LNG, Mikhelson's company received the exclusive right to fly a foreign flag, too.
Isn't Mr. Sechin silently preparing a new basket of delicious sausages?
Battle of the titans
Thus, the invisible struggle between the titans continues - Rosneft and NOVATEK are fighting for a place under the Arctic sun. And it seems that Igor Sechin is still losing one battle after another, especially in terms of building gas tankers at a shipyard in Primorye.
But Leonid Mikhelson does not like the conditions offered by the Zvezda plant at all. He doesn't like the price - it is much higher than that of South Korean shipbuilders. Moreover, shipyards in South Korea have already built 15 gas tankers for Mikhelson. It is clear that construction needs to be continued, since Mikhelson has already launched the fourth line of the Yamal LNG plant. And it seems that NOVATEK will soon fill the entire Northern Sea Route with its gas tankers. What will Mr. Sechin have to do? Blink his eyes?
Meanwhile, the Head of Rosneft again promises to take the situation under control. And so the former assistant in Saint-Petersburg then tearfully complains to his boss Vladimir Putin about the "upstart" Mikhelson, then "quietly" negotiate with Minister of Industry Denis Manturov. This was reported by The Moscow Post.
But all these actions have not given results yet: Leonid Mikhelson was allowed to use the LNG tankers that he already has on the Northern Sea Route. He is given carte blanche to further promote the Yamal LNG project. And today, the results of Mikhelson are more tangible than those of the "real Igor Ivanovich", as Sechin was called during his work in the Government of the Russian Federation (in contrast to the "fake Igor Ivanovich" Shuvalov).
The big game is being continued... And Mikhelson, who is being offered to build new gas tankers at the Zvezda shipyard, has already made a proposal to reduce interest rates for the construction of 15 LNG tankers at the Rosneft shipyard for the Arctic LNG 2 project."
Zvezda shipyard is waiting for new orders for gas tankers
Leonid Mikhelson sent a letter to the Russian Government in mid-June last year. And asked to solve the issue of high interest rates in the construction of gas tankers. This was reported by Kommersant.
The owner of NOVATEK offered to subsidise interest on loans from the budget, or to place the funds of the National Welfare Fund in the accounts of the VEB.RF. The participation of VEB.RF in financing of 6 tankers at the Zvezda shipyard was approved.
And after all, he achieved his conditions!
Will Rosneft be swept off its high pedestal?
It should be noted that the NOVATEK company has recently significantly increased its profit due to the increase in LNG production.
This jump can be explained by successfully launched Arctic projects. NOVATEK implements these projects together with its foreign partners. Experts believe that the increased production of liquefied gas and the implementation of LNG projects contribute to the growth of NOVATEK's capitalization, which in the near future will be able to sweep Rosneft off its high pedestal.
The success of Yamal LNG is also explained by the support of the Russian Government. The project is exempt from MET and export duties for 12 years after the first batch of products is shipped. But this is on condition that the volume of production during this time does not exceed 250 billion cub. m. And during the period of tax benefits, Yamal LNG will receive additional income, which may be more than 1 trillion rubles. The prospects are simply fabulous, to the envy of Rosneft.
NOVATEK does not ask for tax incentives or government funding for Arctic SPG2. But the Russian Government is ready to provide tax incentives for the industrial cluster in Murmansk.
What are such preferences for?
Sechin grinds his teeth
It is clear that Mr. Sechin does not like such activity of Mikhelson. But he continues to struggle for Arctic projects. And he wrote a letter to Vladimir Putin again. In the letter, Mr. Sechin outlined his vision for the development of the Arctic. The businessman drew a plan for the development of the Arctic, not sparing bright colours. However, he immediately began to beg for tax benefits - 2.6 trillion rubles.
Igor Sechin asked to support the draft law on the development of oil in the Arctic. This project provides a special treatment for investors. It's about Vostok oil. This project can combine the Payakhskoye field of Neftegazholding and the Rosneft's fields into an oil-producing cluster. This was reported by Interfax.
Let us remind that a little earlier, Mr. Sechin had made tax incentives for the Samotlorskoye and Priobskoye fields in Western Siberia. But Vladimir Putin unexpectedly imposed a moratorium on the Vostok oil project. And he started talking about inventory. Sechin had to listen that new measures of state support would not be provided until the inventory is completed. This was reported by RBC.
It was a low blow: Mikhelson received a lot of benefits, but Rosneft was sent for inventory. However, Mr. Sechin is a tough guy. And he has a lot of ideas on how to neutralize an too annoying competitor.
"The real Igor Ivanovich" has already gone on the other hand: he asked permission to license West Irkinsky site on the Taimyr Peninsula. The West Irkinskiy site is bordered by Payakha group of fields of Eduard Khudainatov’s Neftegazholding. This is an old friend of Sechin. It is possible that Rosneft's admission to the development of the site will result in the creation of a joint venture with Neftegazholding.
But will Sechin be able to neutralize Mikhelson?
It is quite possible that by trying to continue to impose gas tankers from the Zvezda shipyard on Mikhelson at space prices, Sechin will realize his most cherished dream - to withdraw NOVATEK from the Yamal LNG project.
But now Mikhelson finds new friends - the company Sovcomflot with the strong support of Gennady Timchenko.
Let us recall that Mikhelson managed to solve the issue of LNG transportation along the Northern Sea Route under the ban on the use of foreign tankers. After the adoption of amendments to the merchant shipping code (MSC) in 2017, NOVATEK, which chartered 15 reinforced ice-class gas tankers and two gas export tankers on a long-term basis, could not use them without the permission of the Russian Government. But the Government has removed 26 tankers from the ban on LNG transportation. And now these ships can plow the Northern Sea Route until 2024. Other vessels chartered by NOVATEK were allowed to transport LNG until the end of 2021.
But the experienced schemer Sechin does not leave his dreams - he will make NOVATEK turn towards the Zvezda shipyard. But the price of gas tankers assembled at the Zvezda plant will be much higher than in South Korea. First, South Korea has been building tankers of this class for many years, and secondly, it is building 2-3 tankers for NOVATEK at once. It's cheaper.
There is a reason to grit the teeth!
The Head of Rosneft has already complained to V. Putin on the stubborn Mikhelson, who does not want to build gas tankers at the Zvezda shipyard.
It should also be recalled that Leonid Mikhelson was not included in the consortium of investors of the Zvezda shipyard. For which he received a reprimand from Putin.
Tandem Mikhelson - Timchenko
There is one more fact to the displeasure of Igor Sechin: not so long ago Leonid Mikhelson signed an agreement with Gennady Timchenko, who, according to a number of experts, not because of a pretty face, took responsibility to protect Mikhelson from pressure. And, above all, from Gazprom.
And NOVATEK's problems suddenly dissolved, and soon Gazprombank sold the SIBUR chemical holding to Leonid Mikhelson: thus the former enemies became business partners.
Sechin was not happy about the competitor's strength. And then came the "hot" Arctic projects. Rosneft has made a serious bid for the Northern latitudes. And it has received considerable money for this.
But the world centre of shipbuilding is located in South Korea, and prices there are significantly lower.
But Russia needs to regain its reputation as a major shipbuilder. And Mikhelson is different in that he never says "no". And in any conflict of interest, he offers compromises. Do you want us to order 15 gas tankers for Arctic-LNG-2 in Primorye? You are wellcome, but only on credit. And at a reduced interest rate.
After reviewing the proposal, Head of the Ministry of Industry and Trade Denis Manturov estimated the costs at almost 50 billion rubles. NOVATEK has secured huge tax breaks for the Yamal gas liquefaction project.
Rosneft settles on Gydan
Let’s go on. In the spring of this year, it became known that NOVATEK's problems suddenly dissolved, and soon Gazprombank sold the SIBUR chemical holding to Leonid Mikhelson: thus the former enemies, it seems, became business partners.
Rosnedra was auctioned in West Minkhovskoye land plot adjacent to the company's assets. West Minkhovskoye area does not contain any reserves, and the future licensee will need to conduct exploration.
Both Rosneft and NOVATEK are already operating on the Gydan Peninsula
The main option for the monetization of gas may be the construction of the LNG plant and the Rosneft company has considered the option of Minkowski field. But NOVATEK may also be interested in the new site: It is also building up its resource base on Gydan.
The initial payment will be 124 million rubles. The oil company considered several options for monetization of gas from the field. One of them is to supply to Gazprom’s GTS by creating a joint infrastructure with the East-Messoyakhskoye field (Rosneft and Gazpromneft JV).
In 2017, Vice-President of Rosneft (already former) Vlada Rusakova spoke about the possibility of cooperation with NOVATEK in the construction of infrastructure for connecting to the unified gas supply system. Back in 2018, Rosneft was studying the option of building LNG plants on the basis of the Minkhovsky field. This was reported by Kommersant.
But Sechin's company is not legally allowed to export LNG if the gas for its production is extracted from onshore fields, which may become an obstacle to its LNG projects. In theory, gas could be monetized by building an LNG plant.
And the competition started again!
NOVATEK: the struggle for Gydan
Mikhelson's company isn't sleeping either: NOVATEK expects to receive another asset in Gydan - the North Gydan section. Leonid Mikhelson sent a letter to Vladimir Putin. The Russian President instructed the Ministry of Natural Resources and Environment to consider holding an auction in which only one company can participate. And this is NOVATEK! The North Gydan section should become part of the resource base of the fourth major LNG project in the region.
The North Gydan section is one of ten that the Ministry of Natural Resources and Environment reserved for the company's plans to create an LNG cluster in Yamal and Gydan back in 2016 at the request of Mr. Mikhelson.
The first Yamal LNG is launched, the second - Arctic LNG-2 is planned to be launched in 2023 on the basis of the Utrenneye field on Gydan.
The North Gydan section should become part of the resource base of the fourth major LNG project in the region
But the resource base in the form of proven reserves has not been formed yet: the company is going to invest 120 billion rubles in geological exploration. The reserves of the Gydan section are considered sufficient to create an LNG plant with a capacity of more than 12 million tons per year.
And again a knife in Rosneft’s heart.
Sechin vs Timchenko
Let us also recall that with Sechin’s arrival in Rosneft, the state-owned company replaced the main trader for the sale of oil. Rosneft has signed a five-year contract for the supply of 67 million tons of oil with Vitol and Glencore. The total amount of the contract was about $50 billion.
Gunvor, owned by Gennady Timchenko, began to lose Rosneft's trading tenders for the purchase of oil. This was written by Lenta.
According to sources familiar with the terms of Rosneft's deal with traders, the decision to attract competitors to Mr. Timchenko was due to connections in banking circles and opportunities to lend to the deal to buy TNK-BP. And the purchase prices for Vitol and Glencore were higher than for Gunvor.
Later, Mr. Timchenko said that Rosneft oil was too expensive for him. And competitors agreed to buy raw materials at inflated prices in the hope of getting other business with Rosneft, for example, to develop joint projects in the field of production. Repubic wrote about it.
Market participants considered the main reason for changing traders to be financial. They say that the excommunication of Gennady Timchenko from the traders of the largest oil company became possible with the tacit approval of the Head of State: nothing personal.
But the relationship between Mr. Timchenko and Sechin was not severed. Gunvor and Rosneft signed a contract for the export of 6 million tons of fuel oil. And together they opposed Head of Gazprom Miller in the fight for the admission of independent producers to export liquefied gas.
Two sworn friends - Igor Sechin (on the left) and Leonid Mikhelson
But now the situation is changing again: "sole proprietor" Leonid Mikhelson, who needs gas tankers in large numbers, received help from the Sovcomflot company and secretly from Gennady Timchenko. Sovcomflot has already confirmed its plans to participate in the tanker construction project. And it doesn't matter where the new gas tankers will be built at the Hudong shipyard in China or at DSME, Samsung and Hyundai in Korea…
The Zvezda shipyard is likely to suffer irreparable losses, isn't it? But will Russia suffer losses along with Zvezda as well?