Rosneft and Lukoil team up to jointly explore Arctic shelf

Rosneft will open its licencing zones to Lukoil off of Russia's oil-and-gas-rich Arctic Yamal peninsula.

Given the successful development of their mutual cooperation, and with the goal of raising the profitibility of existing projects, Rosneft and Lukoil have agreed to join forces in the following areas:

• Oil exploration & development, development and transportation of hydrocarbons in the license areas of the Nenets Autonomous District;
• Exploration in the areas licensed to Rosneft on Russia’s Arctic shelf and development of fields that are already open, within the framework of current Russian legislation;
• Development of the market for domestic petroleum products, petrochemicals, gas processing and base oils;
• Joint marketing of associated and natural gas from fields in the Bolshekhetskaya and Vankor zones;
• Joint deliveries of petroleum products, liquefied gas and petrochemical products to the distribution and production facilities of both companies;
• Development of solutions for improving production efficiency for petrochemical products, oil and gas, in Russia and abroad;
• Use of existing logistics infrastructure, including transshipping facilities for crude oil, refined pretroleum products and petrochemical products that are for export; and development and execution of transportation infrastructure projects for petroleum products, including the construction of a product pipeline interconnecting with the "Moscow product ring," and the "South” project.

This marks Lukoil's first offshore deal in Russia since launching the Korchagin oil field in the Caspian Sea last year, Lukoil is also venturing out of Russia, actively seeking US shale gas opportunities (Lukoil planning shale JVs in 2011). Rosneft has been aggressively partnering with foreign majors including BP, Chevron and ExxonMobil for developing its offshore fields.

Key projects of Rosneft and Lukoil:

1. Joint transportation of gas from the Vankor field and the Bolshekhetskaya Depression.
On 12 April 2011, Lukoil and Rosneft signed an agreement, under which Rosneft will independently transport gas from the Vankor field and adjoining license areas to Lukoil’s infrastructure. In turn, LUKOIL will transport gas through its facilities to Gazprom’s gas transportation system. At present, Lukoil and Rosneft are building their own gas pipeline sections and infrastructures.

2. Priazovneft
Rosneft and Lukoil each own a 42.5-percent stake in Priazoneft.  The Administration of the Krasnodar Territory owns the remaining 15 percent. Priazovneft is developing the Temryuksko-Akhtarsk license area on the shelf of the Azov Sea. In 2008, the “New” oil field was opened. The field’s recoverable reserves are: Oil: C1 - 0.87 million tonnes; C2 – 2.25 million tonnes; Gas: C1 – 319 million m3; C2 - 820 million m3. Seismic work is currently underway.

3. Caspian Oil Company
Rosneft and Lukoil each own 49.9 percent of the Caspian Oil Company; Gazprom owns the remaining 0.2 percent. In 2008, the West-Rakushechnaya field in the north-Caspian area was opened. In 2010, an assessment well was drilled at the Ukatnaya structure. Open non-industrial deposit.http://docsearch.derrickpetroleum.com/research/q/Rosneft.htmlhttp://docsearch.derrickpetroleum.com/research/q/Rosneft.htmlhttp://docsearch.derrickpetroleum.com/research/q/Lukoil.html

Lukoil and Bashneft set up JV to develop Trebs and Titov fields. LUKOIL acquires 25.1% stake in Trebs and Titov fields for $167 million.

LUKOIL and Bashneft signed an agreement to establish a joint venture and stipulate conditions for the development of two fields named after Roman Trebs and Anatoly Titov. According to the agreement, LUKOIL will purchase 25.1% of an ANK Bashneft subsidiary, while the license and subsoil use rights for R.Trebs and A.Titov fields will be re-issued in favor of this subsidiary. In its turn, the joint venture will purchase from LUKOIL 29 exploration wells located in the license area. Lukoil will pay 4.768 billion rubles ($167 million) for the stake and book its share of reserves, Chief Executive Officer Vagit Alekperov, said at a signing ceremony in Moscow today.

The parties also agreed to transport the oil from R.Trebs and A.Titov fields via the Varandey Oil Export Terminal owned by LUKOIL to the Barents Sea coast, where the crude will be loaded into tankers. The parties will consider supplying the produced associated petroleum gas to the energy centre of the Yuzhnoye-Khylchuyu field, which is developed by Naryanmarneftegaz (a joint-venture of LUKOIL-70% and ConocoPhillips-30%). The associated petroleum gas will be used for generation of electric power to support the activities of the production units at R.Trebs and A.Titov fields.

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In February of 2011, Bashneft obtained a license for a federal-level site of subsurface resources, including R.Trebs and A.Titov oil fields, for a term of 25 years. Bashneft had agreed to pay approx. RUB 18.5 billion for the license. The license area, 2,151 sq km in size, is located in the Nenets Autonomous District. The total recoverable oil reserves of commercial categories (С1+С2) located within the license areas of R.Trebs and A.Titov fields, as booked in the state balance sheet, reach 140.1 million tons. Developing Trebs and Titov will require $6 billion of investment, Alekperov said. The field may start production at the end of 2013 or start of 2014.

Lukoil planning Shale JVs in 2011

Lukoil is scouting for oil and natural- gas investments in U.S. shale fields, President Vagit Alekperov said.

Lukoil joins a line of companies looking at the NorthAmerican shale industry, as much to get the drilling technology as the oil andgas. Exxon Mobil Corp. (XOM) bought shale gas producer XTO EnergyInc. for $41 billion and PetroChina Co. last month made its biggestoverseas investment of $5.4 billion for a stake in Encana Corp.’s Canada shalefield.

Lukoil is hunting for new ways to recover oil

Through JVs Lukoil wants to access the technology and be able to apply those techniques tooil-rich shale deposits in Russia. Lukoil already is experimenting in theBazhenov formation in West Siberia, which has liquids.

Russia has seen a burst of transactionsthis year.

BP Plc agreed a $7.8 billion stock swap withstate- controlled Rosneft Oil Co., though it’s being challenged byBP’s Russian partners in TNK-BP. On March 3, France’s Total SA agreed to pay $4billion for 12 percent of Russia’s NovaTek. Both groups aim to developfields in the Russian arctic.

Lukoil pioneered such transactions, with ConocoPhillips taking a stake that at one point reached 20 percent. ConocoPhillipshas since sold out as part of a larger asset- disposal program.

Source: Derrick Petroleum E&P Transactions Database

Joint Ventures byRussian and Asian companies to continue

Joint ventures will continue to be used by international oiland gas companies, particularly for most Russian and Asian companies wanting to acquire shale acreage in the U.S. Companies won’t want the negative political backlash that CnoocLtd. went through when it tried to buy Unocal Corp. in 2005. The next round ofjoint ventures may come from Russian,Japanese and South Korean companies.

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Lukoil 2010 Results Presentation

http://docsearch.derrickpetroleum.com/pageNav/view1/docId/11031-0000/Lukoil_2010_Financial_Results.html