Russia's Rosneft sets foot in Mediterranean with $1.125bn Eni deal

Russia's Rosneft sets foot in Mediterranean with $1.125bn Eni deal
By bne IntelliNews October 10, 2017

Russia's largest oil producer state-controlled Rosneft has acquired 30% in the largest natural gas field in the Mediterranean from Italian Eni, the company announced on October 9.

Rosneft that had just sold 14% of its shares to Chinese CEFC for $9bn, will pay $1.125bn for Egyptian Zohr field and will repay part of the exploration costs retroactively. According to previous reports this could amount to additional $0.5bn.

Eni discovered Zohr off the Egyptian shore in 2015, and will retain 60% in the project, with the remaining 10% held by British Petroleum, also a minority shareholder in Rosneft with 19.5% stake.

"This [deal] allows us to strengthen our position in a promising and strategically important region," notorious head of Rosneft Igor Sechin is quoted as saying in the press release. The reserves at Zohr are estimated at over 850bn m3 (bcm) of gas.

To compare, Rosneft started buying gas assets in 2013 and became Russia's third largest gas producer after Gazprom and Novatek producing about 64bcm of gas in 2016.

The gas ambitions of Rosneft have so far been capped by the carefully protected pipeline gas exports monopoly of Russian natural gas major Gazprom.

However, the participation in Zohr that is planned to be launched in 2017 will allow it to acquire expertise in offshore gas extraction at a field with high international export potential, analysts surveyed by Vedomosti daily said on October 9.

Rosneft relies on foreign companies such as Eni, ExxonMobil, and Statoil for technology and offshore drilling expertise, as the company revives waning production at mainland brownfield sites.

At the same time with a cash pile of about $21bn, the $1.1bn acquisition of the stake in Zohr is not expected to drastically influence Rosneft's balance.

 

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