Lukoil and Rosneft Sign Long-term Cooperation Deal

Friday, April 22, 2011

President of Rosneft Eduard Khudaynatov and Head of Lukoil Vagit Alekperov have signed an agreement on long-term cooperation between their companies. Deputy Prime Minister Igor Sechin was present during the signing ceremony.

Capitalizing on the successfully developing cooperation between the two companies and striving for improved profitability of existing projects, Rosneft and Lukoil agreed to combine efforts in the following areas:
- exploration, development and transportation of hydrocarbons on the license areas in the Nenets Autonomous District;
- exploration on Rosneft's license areas on the Russian Arctic shelf and development of the already discovered fields in accordance with the Russian law;
- development of the market for locally produced petroleum products, petrochemicals, gas derivatives and motor oils;
- joint marketing of associated and natural gas from Bolshekhetskaya and Vankor fields;
- reciprocal deliveries of petroleum products, liquefied gases and petrochemical products to distribution and production facilities of both companies;
- joint search for ways to improve marketing of petrochemicals, gas and oil derivatives in Russia and abroad;
- joint use of the existing logistical infrastructure, including crude oil, petroleum and petrochemical products export facilities; preparation and execution of petroleum products transportation projects, including the construction of a petroleum products pipeline to the "Moscow product ring" and the "South' project.

Speaking about the signed agreement, President of Rosneft Eduard Khudaynatov remarked: "It goes without saying that with the existing fiscal environment, infrastructural constraints and the growing proportion of difficult reserves, we need to expand our cooperation and combine efforts to improve efficiency of our projects."

In his turn the Head of Lukoil Vagit Alekperov said: "We expect that the long-term cooperation with Rosneft will help our company to gain access to large new hydrocarbon reserves in Russia".

By 15 May 2011 the Parties will have to establish joint teams for the above areas and by August 1 draw up a shortlist of projects, assess efficiency and find mutually acceptable mechanisms for their cooperation.

Key joint projects of Rosneft and Lukoil:

1. Joint gas transportation from the Vankor field and the Bolshekhetskaya Depression.

On 12 April 2011, Lukoil and Rosneft signed an agreement, according to which Rosneft would transport gas from the Vankor field and adjoining license areas to Lukoil's infrastructure. Then Lukoil would pump gas via its infrastructure to the Gazprom gas transportation system. Currently, Lukoil and Rosneft are building sections of their respective gas lines and infrastructure.

2. OOO Priazovneft
Rosneft and Lukoil each own a 42.5% share in Priazovneft. Another 15% belongs to Krasnodar province authorities. Priazovneft is engaged in developing the Temryuksko-Akhtarsk license area located on the Azov Sea off-shore. In 2008, the Novoye oil field was discovered in this area with the following total recoverable reserves: C1 oil reserves - 0.87 million tons, C2 oil reserves - 2.25 million tons; C1 gas reserves - 319 million cubic meters; C2 gas reserves - 820 million cubic meters. Seismic work is currently underway.

3. OOO Caspian Oil Company (KNK)
Rosneft and Lukoil each own 49.9% in the company; Another 0.2% belongs to Gazprom. In 2008, the Zapadno-Rakushechnoye oil field was discovered in the northern section of the Caspian sea. In 2010, an assessment well was drilled on the Ukatnaya structure and a non-commercial reservoir discovered.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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