Mervyn Davies, Britain’s former trade minister, has been named deputy chairman of a Russian-owned oil and gas business threatened with the loss of its North sea exploration licence following a row with ministers. Davies, a former chairman and chief executive of Standard Chartered bank, will oversee a shake-up at the holding company owned by Russian tycoon Mikhail Fridman’s LetterOne Group.
He will be charged with establishing “blue-chip corporate governance standards” at LetterOne, while the company considers disposing of North sea gas fields that it acquired from German utility RWE.
It was unclear whether the firm planned to press ahead with the sale, or pause while Davies reconfigures the boardroom and the ownership structure is overhauled to assuage the concerns of the British government.
Fridman had previously signalled that he planned to sell the gas fields after appointing Morgan Stanley to set a price and organise the sale. It was understood that the sell-off would avoid a showdown with the British government, which is under pressure to clamp down on the activities of oligarchs in the wake of Russia’s actions in Ukraine. The sale is expected to fetch a total of up to $1bn (£650m) according to several banking and industry sources. LetterOne declined to comment.
LetterOne took ownership of the fields in the UK North sea as part of its purchase of DEA, RWE’s oil and gas unit, for €5.1bn (£3.7bn), with oil and gas assets in Norway, Egypt, Libya, Germany, Poland, Turkmenistan and Algeria. But in February, Britain’s government said it would block the deal due to concerns about the impact of any future potential sanctions on Russia or LetterOne’s owners might have on the operation of the North sea fields, and Britain’s gas supply.
Last month, the energy minister, Ed Davey, proposed to revoke DEA UK’s North sea licences “unless LetterOne arranges for a further change of control of the DEA UK gas fields in the North sea”, the ministry said.
The decision comes as the North sea requires new investment to rekindle its dwindling its oil and gas reserves, as major oil companies reduce their presence in the area.
Ukrainian-born Fridman, who made a fortune in Russia after the Soviet Union collapsed in 1991, has tried to allay British worries by grouping the contested assets in a Dutch foundation, a step which, he says, would insulate them from any possible sanctions.
LetterOne has hired John Browne, former chief executive of BP, to help expand DEA globally, including in the United States, and possibly salvage the North sea deal.
