Rosneft Partners, CNPC to Explore Oil and Gas in East Siberia

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Researched by Industrial Info Resources (Sugar Land, Texas)--Russian state-controlled company OAO Rosneft (OP:OJSCY) (Moscow, Russia) and China National Petroleum Corporation (CNPC) (Shangai, China) have signed a memorandum of understanding to jointly explore and develop oil and gas reserves in East Siberia.

Rosneft will control the joint-venture with a 51% stake, while the Chinese CNPC will own the remaining 49%. The joint-venture will be formed on the basis of Rosneft's recently acquired Srednebotuobinskoye oil and gas field. The field, acquired by Rosneft through new subsidiary Taas-Yuryakha Neftegazodobycha, holds 134 million tons of oil reserves and 155 billion cubic meters of gas, according to the announcement.

The field will supply crude oil to Rosneft's Komsomolsk refinery and the planned Far Eastern Petrochemical Company. Gas production in the field likely will be contingent upon liberalization of the gas export regulation in Russia.

"The agreements reached prove once again that Rosneft has a sufficient resource base to meet its strategic goals," said Rosneft Chief Executive Officer Igor Sechin in the statement. "The participation of our long-term partner in exploration and production activities will help speed up the start of production at Taas and will facilitate the expansion of cooperation with CNPC in other areas."

In August, Rosneft discovered a new oil and gas deposit at its Mogdinsky block in East Siberia's Irkutsk region, some 160 kilometers from the ESPO pipeline.

The ESPO pipeline connects Russia's East Siberian oil province to the port of Kozmino, which is located on the Pacific coast. The pipeline's offshoot route used for Rosneft deliveries begins at Russia's Skovorodino and ends in China's Mohe.

China is set to become Russia's largest oil export market after Rosneft. CNPC signed a $270 billion, 25-year supply deal in June.

"The fact that Rosneft is making the joint agreements over not only oil, but also gas, could signal the state company's growing ambitions in gas export," said Pavel Kushnir, an analyst at Deutsche Bank based in Moscow. "The liberalization of the pipeline gas export rights would be a major change in the domestic gas market, implying a risk for OAO Gazprom (RU:GAZP) (Moscow) and a major opportunity window for independent gas producers."

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