Rosneft to Set up Joint Venture with the Japanese for Magadan Shelf Projects

Rosneft has decided to cooperate with the Japanese on the Magadan shelf and in East Siberia after having a conflict with its Chinese partners. According to the local media, the Russian oil company will give up to 49% to a consortium of Japanese investors in the joint venture on exploration and development. The Inpex Corp., Japan Oil, Gas and Metals National Corp. (JOGMEC) and some oil traders may join the consortium. The geological exploration at the sites may start this year and the Japanese are ready to bear all the costs.

The consortium of Japanese companies will receive up to 49% in the joint venture with Rosneft on the exploration and development of the East Siberian and Far Eastern deposits if perspective reserves are found, the Japanese newspaper Nikkei reported. It mentions the Inpex Corp., Japan Oil, Gas and Metals National Corp. (JOGMEC) and some oil traders among possible participants of the consortium. The geological exploration at the deposits could start this year. Rosneft told Kommersant that the joint venture will be formed at the stage of the carrying out of the geological exploration but it didn't mention the size of the stakes.

Intex Corp. is one of the largest Japanese oil and gas companies and is working in Indonesia, Australia, USA, Mexico, Brazil and Europe. The company participates in numerous shelf projects including the Gulf of Mexico and the Caspian Sea. JOGMEC is an administrative body that is responsible for oil and gas supplies to Japan. The corporation doesn't have its own producing projects.

Rosneft still doesn't have a license for the exploration at the Magadan shelf. Last autumn the company submitted applications to the Ministry of Natural Resources to obtain the deposits of Magadan-1,2,3 and another 2 sites near the Magadan shelf without a tender and it hopes to obtain them this year, Rosneft's head E. Khudaynatov said in March. He assessed the perspective resources of the 5 sites at 2 billion tons of oil equivalent. In late-May the Governor of Kolyma, N. Dudov said that, according to preliminary estimates, the license issue for the Magadan sites will be over by September 1st.

We are waiting for partners. the Chinese and some Japanese companies are interested. They are ready to start, Mr. Khudaynatov said in March.

The Russian Government started to actively invite Japanese investors into their oil and gas projects in the spring, after the tsunami and earthquakes that hit the Japan's economy and the energy sector in particular. It was expected before that Rosneft would develop the Magadan shelf together with CNPC in the framework of the joint venture with 'Vostok Energy'. However, at the beginning of the year a conflict between Rosneft and the Chinese party on oil supply happened and the relationships has soured somewhat.

In late-May, Rosneft and the Japanese Ministry of the Economy agreed on the forming of working groups to study the resource base of the shelf deposits of Magadan-1,2,3 in the Sea of Okhotsk and also 11 sites in the East Siberia. The Japanese companies agreed to bear all risks: they will totally finance the geological exploration. Rosneft and the Japanese companies agreed to cooperate in the processing of the production. They are also discussing the possibility of the Japanese participation in the modernization of the Komsomolsk oil refinery plant and the joint construction of a Far Eastern oil chemicals complex.

D. Lyutyagin an analyst from Alor Invest says that Rosneft has found another foreign partner onto which it can shift all risks connected with the project. IFD-Capital's analyst, V. Kryukov adds that Japan after the accidents needs new sources of raw materials resources and the Magadan shelf is a good choice from the point of view of logistics.

This article was originally published in Russian by www.kommersant.ru and translated and edited by the staff of www.rusmininfo.com the leading agency for Oil and Gas News in Russia and the surrounding republics.