Over $1 billion in deals coming out of Forum in Russia

Jun 19, 2015 12:00 AM

Attendance at this year’s St. Petersburg International Economic Forum (SPIEF) is up from a year ago when many Western companies decided to decline invitations in the wake of Russia’s involvement in Ukraine. This year, many American companies have decided to abstain from attending again, but many European oil majors joined their Russian counterparts in St. Petersburg to announce over $1 billion in deals and plans to expand their ties with Russia.

BP closes $750 million agreement with Rosneft in St. Petersburg

In a joint press release issued by BP and Russian oil major Rosneft, the companies announced that Rosneft will sell a 20% state of Taas-Yuryakh Srednebotuobinskoye oil and gas condensate field. The field is one of the largest in eastern Siberia and currently produces about 20 MBOPD. As part of the deal, BP and Rosneft will work on expanding infrastructure and further exploring the field and an additional 115,000 square kilometer (about 44,000 square miles) Area of Mutual Interest (AMI).

Rosneft CEO Igor Sechin said at SPIEF that BP’s 20% share is estimated at $750 million, reports Russia Today.

“I am pleased we have been able to conclude this transaction,” said David Campbell, president of BP Russia. “It further deepens our relationship with Rosneft and underlines BP’s position and strategy as a successful long-term investor in Russia.”

Russia

Source: Rosneft

The two companies also announced that they would be working together to explore AMIs in the West Siberian and Yenisey-Khatanga basins, which cover a combined area of about 260,000 square kilometers (about 100,000 square miles). Any joint ventures formed to exploit resources found in the AMIs will be owned 51% by Rosneft and 49% by BP, according to the press release.

Rosneft and BP will also be reorganizing their German Ruhr Oel GmbH (ROG) refining joint venture. Rosneft will double its shareholding in Bayernoil refinery to 25% from 12.5%; the MiRO refinery to 24% from 12% and the PCK Raffinerie to 37.5% from 18.75%. In exchange, BP will consolidate 100% of the equity of the Gelsenkirchen refinery and the solvent production facility DHC Solvent Chemie.

Total sells refinery interest to Rosneft for $300 million

In addition to the restructuring of its shared refining assets with BP, Rosneft also announced that it would be expanding its refining capacity in Europe. Total (ticker: TOT) announced that it signed an agreement to sell its 16.67% interest in the Schwedt refinery in northeastern Germany (Brandenburg) to the Russian oil major for $300 million.

RNFTF already held an 18.75% stake in the facility indirectly, according to the press release.

The Schwedt refinery has a capacity of 12 million tons per annum. The refinery is owned by Shell (ticker: RDSA) (37.5% interest) and indirectly by BP (18.75%), Rosneft (18.75%), Total (16.67%) and ENI (8.33%).

Gazprom plans to double Nord Stream capacity

While Rosneft expanded its refining capacity in Europe, Russian state-owned giant Gazprom announced that it plans to double the capacity of its Nord Stream gas pipeline to Germany to 110 billion cubic meters (Bcm) per year. Shell, E.On and OMV have all been invited to participate in the project. The four companies have signed a memorandum of intent to create the infrastructure, reports Russia Today.

“The memorandum demonstrates the intention of the sides to construct the two threads of the pipeline from the coast of Russia through the Baltic Sea to the coast of Germany, Gazprom said in a statement.

“Our almost 50-year cooperation with Gazprom should contribute to the success of this undertaking, which will serve as a further diversification of energy supply routes to Europe,” said Manfred Leitner, member of the executive board at OMV.

Gazprom spokesman Sergey Kupriyanov told reports the Russian major would retain 51% of the project and that the route would follow that of Nord Stream.

The pipelines further reduce the need to transport gas through Ukraine where tensions remain high over gas supply from Russia and conflict is ongoing between eastern and western Ukraine.

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