Statoil Clinches Deal with Rosneft on Exploration in Russian Arctic and Sea of Okhotsk
Following in the footsteps of ExxonMobil and Eni, Statoil on Saturday (5 May) signed an exploration and asset-exchange deal with Russian state oil giant Rosneft that will give the Norwegian firm access to potential oil and gas reserves in the Russian sector of the Barents Sea and the Sea of Okhotsk in the Far East.
IHS World Markets Energy Perspective
The Rosneft-Statoil partnership is the latest in a frenzy of recent deals signed by the Russian oil company, which—in addition to joining forces with the Norwegian firm to explore in the Russian Arctic—may also team up with Statoil to bid in Norway's own upcoming licence rounds
The Rosneft-Statoil deal is modelled after the recent ExxonMobil and Eni agreements with the Russian state oil company and could see investment in the four assets already included in the partnership at as much as USD100 billion.
Rosneft's slew of Arctic exploration partnerships—spurred on by a commitment by new Russian president Vladimir Putin to ease restrictions on investment in offshore areas and provide much-sought tax breaks and other incentives—may not yet be done, as several Russian companies—including LUKoil, Bashneft, and Russian-British TNK-BP, are all looking to grab a piece of the action.
And Statoil Makes Three
Rosneft is on a roll, and there is no indication it is ready to stop any time soon. In the span of the past three weeks, the Russian state oil giant—also the country's top oil producer—has unveiled three separate partnerships with major foreign energy companies, all geared to spur on exploration of the Russian Arctic but also granting Rosneft the right to enter projects outside Russia in exchange. Following recent deals with both United States supermajor ExxonMobil and Italy's Eni, Rosneft announced on 5 May that it had reached yet another exploration partnership, this time with Norway's Statoil. The agreement is reportedly worth USD2.5 billion, but future investment in the fields covered under the deal could see total investment of as much as USD100 billion, according to Rosneft president Eduard Khudainatov.
In a signing ceremony presided over by Vladimir Putin—officially inaugurated as Russia's president once again earlier today (7 May) in Moscow—Khudainatov and Statoil chief executive officer Helge Lund unveiled a deal that is structured similarly to Rosneft's earlier agreements with both ExxonMobil and Eni (see Related Articles below). Statoil and Rosneft will set up joint ventures (JVs) on the basis of several licences held by the Russian company, with Statoil receiving a 33.3% stake in each of these new entities. Assets included in the partnership include the Perseyevsky field in the Russian sector of the Barents Sea, as well as the Kashevarovsky, Lisyansky, and Magadan-1 fields in the Sea of Okhotsk, in Russia's far east, north of the hydrocarbon-rich Sakhalin Island. In total, the licences cover an area of more than 100,000 sq km and contain estimated recoverable oil reserves of 2 billion tonnes (14.67 billion barrels) and 1.8 tcm of gas. Khudainatov said that if estimated resources are confirmed in exploration, total investments in development and exploitation could reach as much as USD100 billion, including USD35–40 billion in the Perseyevsky field and another USD10–20 billion in each of the Sea of Okhotsk fields.
For Statoil, the deal with Rosneft is something of a crowning achievement after years of lobbying the Russian government and poking around for opportunities in the country. Statoil has a 24% stake in the Shtokman gas field project in the Barents Sea, but the Norwegian firm has long coveted access to Russian oilfields. This focus on Russia projects only intensified in the aftermath of the Russian-Norwegian governmental agreement in 2010 on their maritime border in the Barents Sea, ending more than 40 years of dispute and opening up the area to more oil and gas exploration. Statoil, eager to tout its own Arctic experience and technological expertise across the border in Russia, no doubt has been chomping at the bit until now as the Norwegian firm saw opportunities in the Russian sector of the Barents Sea snapped up first by BP, then by ExxonMobil (which stepped in to the BP-Rosneft projects when BP was blocked by its Russian partners in TNK-BP from completing the deal with Rosneft), and then by Eni. Nevertheless, Lund expressed no hint of bitterness in Statoil having to wait its turn until now, focusing only on the positives in the agreement with Rosneft, saying in a statement, "We aim for early access at scale in new and promising basins, positioning us for high-impact exploration… This agreement is at the core of our strategy, supporting our long-term growth ambitions."
Outlook and Implications
The Statoil-Rosneft partnership agreement caps a remarkable two months for Putin in between his inauguration today and his election on 4 March. In that relatively short span, the president—utilising the full scope of his powers as both Russia's prime minister and president-elect—single-handedly transformed the dynamics of Rosneft's Arctic exploration programme, opening the door to foreign and private Russian players to participate in the development of offshore and coastal shelf zones and also catalysing the move for billions of dollars in investment in these regions by vowing to implement major tax holidays and other fiscal incentives in his return to the Kremlin (Russia's presidential administration), where he resided from 2000 to 2008 before a four-year stint as prime minister. Of course, virtually all of the billions of dollars in new investment in Arctic exploration is merely hypothetical at the moment, contingent not just on legislative follow-up to put Putin's initiatives into law but also on the discovery of proven, commercial hydrocarbons in the Russian Arctic.
Putin's role in crafting the Rosneft partnerships with ExxonMobil, Eni, and Statoil is perhaps overstated as well, as Deputy Prime Minister Igor Sechin, Russia's top energy policymaker and the former chairman of Rosneft, appears to have been the main architect of the exploration and asset-swap agreements. Sechin's role in the new Russian government, set to be announced shortly under ex-president and soon-to-be prime minister Dmitry Medvedev, remains unclear, but the deputy prime minister's success in securing investment in Russia's Arctic at the same time as building up Rosneft's international portfolio appears likely to earn him a promotion, probably to the Kremlin. Indeed, before exploration has truly begun under Rosneft's new Arctic partnerships, the state-run Russian oil firm is already profiting handsomely by the quid pro quo arrangements made with its recent deals with the foreign energy companies. Under the agreement with Statoil, Rosneft is expected to obtain stakes in Statoil projects in Norway's offshore zones, either in the Norwegian sector of the Barents or North Sea, or both. Khudainatov said Statoil has also offered Rosneft the chance to participate with the Norwegian firm in Norway's coming licensing rounds.
Furthermore, all indications are that the Rosneft-Statoil deal is just the latest in a series of Arctic exploration deals for the Russian state firm, not the final one. Sechin said on 4 May that the government had formed working groups with two Russian companies on potential shelf projects, further noting that letters of invitation to team up with Rosneft on Arctic exploration had recently gone out to LUKoil, Bashneft, and TNK-BP. LUKoil has confirmed its interest in striking a deal with Rosneft that would get the country's second-largest oil firm access to Arctic reserves that were previously off-limits to it as a privately owned company, and news reports have said the two companies are set to hold negotiations later this week. TNK-BP has also confirmed its interest, as Chris Einchcomb, TNK-BP's senior vice-president of exploration and appraisal, told Dow Jones that the Russian-British firm looks forward to negotiating with Rosneft in the working group "in the nearest future". BP, given its recent traumatic history in trying to complete an Arctic exploration deal with Rosneft directly, responded cautiously, saying, "TNK-BP's management has not yet presented to shareholders plans about activities in the Arctic", according a BP spokesman. Nevertheless, in a reflection of the draw of the hydrocarbon potential in the area, Dow Jones quoted the spokesman as saying, "In general, BP remains interested in participating in Arctic projects in Russia and in the rest of the world".
- Russia: 4 May 2012: President-Elect Vows Tax Relief to Stimulate Tight Oil Recovery in Russia
- Russia: 3 May 2012: Increased Extraction Taxes Hit Rosneft As Q1 Net Profits Drop 8.9% Y/Y
- Russia: 26 April 2012: Rosneft Strikes Again with New Offshore Exploration and Asset Agreement with Eni
- Russia: 24 April 2012: Plans for Development of Russia's Shtokman Gas Project Reportedly Undergoing Revamp
- Russia: 17 April 2012: Rosneft, ExxonMobil Unveil Further Plans for Strategic Co-Operation in Russia, North America
- Russia: 13 April 2012: President-Elect Announces Tax Breaks and Incentives for Hydrocarbon Projects Offshore Russia
- Russia: 5 April 2012: Russian Government Considers USD44-Bil. Infrastructure Development Plan in Arctic
- Russia: 2 April 2012: Russian President-Elect Opens Door to Statoil for Projects in Russian Arctic
- Russia: 7 March 2012: Questions Regarding Energy Sector Reform Abound for Russian President-Elect
- Russia: 1 March 2012: PM Supports Expanding Access to Oil and Gas Exploration on Russian Continental Shelf
- Indian government releases DPCO 2013, expanding price controls to 652 drugs
- Key US data releases and events
- Budget 2014: US administration signals greater willingness to compromise
- Mercedes-Benz unveils important new S-Class
- GDP, inflation, retail sales, public finances, and Bank of England minutes all feature in UK Economic Week starting 20 May
- Kremlin power struggle becomes evident as influential Russian political ideologue resigns
- Global Economic Impact of the Japanese Earthquake, Tsunami, and Nuclear Disaster
- Slow start to 2013 highlights ongoing economic challenges in Vietnam
- Consumer spending and export recovery drive Japan's GDP growth in Q1
- Chinese vehicle sales and production rise to over 2 mil. units in March, Q1 sales up 13.2% y/y – CAAM