Page 4 - FSUOGM Week 01 2021

FSUOGM COMMENTARY FSUOGM

Rosneft sheds 10% stake in Vostok

Oil, buys out private partner

Rosneft is pinning its hopes on Vostok Oil to deliver growth over the coming decades

RUSSIA ROSNEFT has closed the sale of a 10% stake in serve Asia-Pacific markets, the company has
its Vostok Oil venture in the Russian Arctic to said, and so investors from this region could be
WHAT: commodities trader Trafigura, taking the ambi- potential candidates.
Rosneft has sold 10% of tious project one step closer to realisation. It has These suitors will be attracted by the lucra-
its Vostok Oil venture to also consolidated its control over Vostok Oil by tive tax breaks granted to the project. Russian
Trafigura. acquiring one of its main assets from a private authorities in December made Vostok Oil
partner. exempt from paying oil export tax on its future
WHY: The Russian oil giant is pinning its hopes on output, as well as providing other incentives to
The producer has brought Vostok Oil, a group of oilfields in the country’s support investment.
on board a partner to far north, to maintain production over the com- Further incentives appear to be on the way,
share costs and risks and ing decades as its older deposits further south with Russian Finance Minister Anton Siluanov
help with offtake. mature. The company estimates the project’s liq- revealing on December 30 that his ministry was
uid hydrocarbon reserves at 6bn tonnes (44bn considering additional concessions for compa-
WHAT NEXT: barrels), which is enough to support over 2mn nies working in the Russian Arctic, including a
Rosneft appears to barrels per day (bpd) of production. Vostok Oil lower corporate profit tax.
be swapping assets also has gas potential, with Rosneft CEO Igor
with private partner Sechin recently estimating the project could Consolidation
Neftegazholding to secure deliver as much as 50mn tonnes per year (tpy) Rosneft has also announced closing the acqui-
100% ownership of the of LNG to markets. sition of 100% stakes in companies called
Vostok Oil assets. Despite these bold claims, many analysts say Taimyrneftegaz and Taimyrburservis. Tai-
further exploration is needed before Vostok Oil’s myrneftegaz has been referred by Rosneft in the
production potential can be evaluated. past as a subsidiary of Neftegazholding, a private
oil firm with rights to the Payakha field and sev-
Bringing Trafigura on board eral other large onshore licences in the Krasno-
Rosneft revealed on December 29 it had com- yarsk region of Eastern Siberia.
pleted the 10% stake sale to Trafigura, agreed Neftegazholding is understood to be con-
in November. Trafigura confirmed this, not- trolled by a former Rosneft president, Eduard
ing the acquisition was funded by long-term Khudainatov. Khudainatov served in the role
debt financing. The deal’s value has not been between 2010 and 2012, when he was replaced
disclosed. by Sechin. He then went on to found Neft-
“The investment provides Trafigura with egazholding, although the company reportedly
access to a world-class, major new onshore has close informal ties with Rosneft.
oil-producing region in Siberia’s Taymyr Prov- The ins and outs of Rosneft’s transaction with
ince comprising the Vankor and Payakha clus- Neftegazholding are unclear. However, evidence
ters with an estimated 6bn tonnes of high-quality suggests that some form of asset swap is under-
crude oil reserves,” the Swiss trader said in a way. Russia’s company registry shows that Neft-
statement. “It also builds on the long-standing egazholding has become the owner of a 9% share
commercial relationship between Trafigura and in RN-Severnaya Neft, a Rosneft subsidiary
Rosneft, providing access to long-term offtake working in the Timan-Pechora Basin. RN-Sev-
supply of crude oil, including from Vostok Oil.” ernaya Neft produced around 50,000 bpd.
Trafigura has been handling the bulk of Ros- Rosneft said in a conference call in December
neft’s sea-bound oil exports for years. The pair that it planned to part with mature assets across
are also partners at Nayara Energy, a joint ven- Russia producing over 400,000 bpd of oil, to
ture that owns India’s second-largest refinery raise funds for Vostok Oil. Analysts welcomed
in Vadinar, with a throughput capacity of over the move, saying it signalled a shift in Rosneft’s
400,000 bpd. The plant could be a potential strategy towards rationalisation.
recipient for Vostok Oil’s crude. RN-Severnaya Neft was among the assets that
Rosneft will likely reach out to additional Rosneft executives said would be put up for sale,
partners before it pushes ahead with develop- alongside Orenburgneft, Samaraneftegaz, Vary-
ment at Vostok Oil. The project will primarily oganneftegaz and Sakhalinmorneftegaz. ™

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