Russia Monitor is a review of the most important events related to Russian internal and external security, as well as its foreign policies.
Date: 30 November 2020
Rosneft Plans to Sell Some Deposits Amid Costly Vostok Oil Project
Rosneft plans to sell depleted assets to streamline the company and raise funds for its priority project Vostok Oil, according to sources in the Russian crude industry. Many signs are that some of the latest official and unofficial news might be a deliberate leak from Rosneft.
After talks with the company’s top managers, analysts at BCS brokerage said more than 200 license areas could be sold, with their total annual output of 20 million tons of crude, or 9 percent of the company’s whole production in 2019. Press agency Interfax quoted Sova Capital brokerage, according to which in a year and half, Rosneft plans to sell some of its underperforming fields, including Samaraneftegas, Orenburgneft, Sakhalinmoreneftegas, and some others. Rosneft is said to trade reserves at as low as $1-$2 per barrel to mostly Russian buyers. Russia’s biggest oil firm is said to sell its marginal assets to streamline the company and provide capital for developing its Vostok Oil, a major Arctic project located on the Taimyr Peninsula. Rosneft and its business partners will plan to produce 100 million tons of crude each year by 2030. Oilfields under the Vostok Oil project – both old and new with geological explorations being underway – are estimated at 6 billion tons of liquid hydrocarbons. However, if Rosneft wants to launch it, it needs massive financial outlays, mostly to build adequate infrastructure involving a port and a 700-kilometer oil pipeline. The whole project is valued at between $70 and $100 billion. Rosneft raises funds by selling stakes in Vostok Oil where the Singaporean-based energy company Trafigura bought a 10 percent stake, possibly for $7 billion. The Russian company is still in talks with BP and an Indian company over the sale of other stake packages. In addition to selling shares to foreign businesses and gaining its capital, the third solution to get money for the Vostok Oil project is state aid. Igor Sechin is equal to no one in this respect. He has long asked Vladimir Putin to grant Rosneft huge tax reliefs while in the spring of 2020, the Russian government adopted relevant regulations on tax breaks for this project.
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