The wolf, the bear and the oil: Enrico Mattei’s bridge between nations as strong as ever
- Written by Vlad-Adrian Iancu
Anyone can see into the past, it is a basic human feature. But what about seeing into the future? We are accustomed to call these men ‘visionaries’. What do we call the men that actually shape the future, not only perceive what it could look like? These are people that see what could be and make it into what we today perceive as ‘is’. We say that the dreamers of today are the doers of tomorrow. One such man was Enrico Mattei, the founder of Eni. When the company that you brought to life is called ‘a state within the state’ you know it has huge potential. And nobody saw it coming, apart from him. With one swift act he destroyed the Cold War doctrines and started a long term oil agreement with Russia. The economic isolation was over and the two countries started a collaboration that is still up and running. The bricks were laid back then, but who will reap the benefits today? Enter Rosneft.
Igor Sechin, Rosneft CEO, in an interview with Il Sole 24 ore, looks back with consideration at the leader that was Enrico Mattei and praises his dream of cooperation between Italy and Russia. Between talking about the global oil market agenda, the economy and plans for the future, Mr. Sechin confirmed that he very much wants to continue the tradition of cooperation between “the she-wolf that raised Romulus and Remus and the Russian bear”. Development of relations with Italian partners is the cornerstone of his vision for Rosneft. Building on strong ties is the way to go and to this extent Rusia and Italy will continue to share efforts in upstream, downstream, refining, logistic and technological support and most importantly: oil services.
Last year alone we delivered almost 16 tons of oil and petroleum products for the total amount of USD 5.7 million in the direction of Italian sea ports
But this is not the end of it. Plans are in motion for a full blown version of Enrico Mattei’s dream. In time it is envisioned that the Eni Corporation will indeed participate in broad scale production projects in Russia. In the meantime, the companies are implementing joint offshore projects. The goal is to reach full cooperation also in the fields of oil production, refining, technological development and geological exploration. This is the vision. Of course, this vision exists in a certain world and is very much affected by it. When asked about the current decision of privatizing some of the shareholding, and about the timing of such a decision, Mr. Sechin replied that it’s finally up to the Government. The company’s goal is to simply increase the value for its shareholders and the state is the biggest one. Thus, a fast and reliable solution to this problem will certainly maximize the state’s revenues from potential sale of its shareholding. But, because of the sanctions and the world oil market, the company’s current quotes barely match its value. Budget problems are also an issue and it seems that the way to go would be retaining strategic investors. If the market recovers and the sanctions are lifted there is a chance at an efficient privatization process. Talking about bumps in the road it is also important to mention that an impending decision about prolonging the EU sanctions will be made.
Expanding sanctions to the corporate level is unreasonable, illegal and, most importantly, it undermines the foundations of the contract law. There are no tensions between our partners and us
Mr. Sechin went on to explain that Rosneft fulfils its obligations to its partners by continuing to invest in successful European assets such as refineries in Italy and Germany. He underlined the aspect of mutual trust as a basis of cooperation.
In what pertains to the agreement that OPEC has to reach in the matter of oil prices the Rosneft Chairman thinks that the solution to the oil crisis might be in Russian hands: in terms of production they are the most efficient ones worldwide. According to them, Rosneft’s operating expenses make up USD 2.1 per barrel of oil equivalent. And, owing to a high quality resource base, their production projects are mainly long term. With an average oil price expected at USD 40-45 per barrel, the need to ensure the required return on investments in new production projects is ever present.
The main international challenge for Russian economy is a much fiercer competition in the international energy markets
Another solution that was on the table is the temporary freezing of production in order to handle the highly unpredictable price fluctuations. But since January 2016 the price has reached 50 dollars. According to Mr. Sechin, who quotes the analysts, it seems that the market is rebalancing more quickly than expected.
It is a known fact that Europeans don’t find the dependency on Russian energy supplies to be a good thing, but they also get frustrated when Russia offers a piece of the pie to China or Asia in general. Is there any chance that the Chinese market will become more attractive than Europe? Mr. Sechin advises us not to worry. Given the huge infrastructure and presence in countries like Germany, where Rosneft is the market leader, there is a relatively low chance of backing off from Europe. But compared to the European market that has decreasing growth rates, China actually has intensive consumption demand. Rest assured the new oil and gas resources are still being developed in the East of Russia and directed towards the newly emerging Asian market which is positioned better.
There is no need to get anxious in this respect: supplies to China account for 13% within the structure of Rosneft’s export
He just calls this ‘normal market diversification’. The message is quite simple actually, and it’s far from a lesser known one. As history proved time and time again, it is the nations that work together that thrive. Expanding your operations and making new connections is the tried and true method. Will the nations of OPEC or any other lone wolves learn this lesson in time to stop their collapse? Or will they crumble on the inside while they hold on to their traditions? Either way, history is in the making, one visionary at a time.
Rosneft is the leader of Russia’s petroleum industry and the world’s largest publicly traded oil company. Company’s main activities include prospecting and exploration of hydrocarbon deposits, oil, gas and gas-condensate production, upstream offshore projects, processing, as well as oil, gas, and product marketing in Russia and abroad.
The Company is included in the list of strategic companies and organizations of Russia. Company’s largest shareholder (69.50% of the equity) is Rosneftegaz OJSC, fully owned by the Russian Government, while BP holds 19.75% of shares, one share belongs to the state represented by Federal Agency for State Property Management, whereas the remaining shares are free floating.