Russian oil giant Rosneft and NefteGazHolding, a company belonging to Igor Sechin’s associate Eduard Khudainatov, are preparing to sell Asian investors a large share in oil fields in north-eastern Siberia.
Citing federal officials and sources familiar with the negotiation proceedings, the Vedomosti news agency reported that buyers from China and India will be offered up to 40% of a project to unite four fields in Russia’s Krasnoyar Krai, including the fields that form part of the Vankor cluster, which the Russian state media has described as the country’s “largest northern asset”.
The cluster, which includes four extraction zones, is one of the few remaining oil fields in Russia where the subsoil’s resources are not close to depletion. Discovered in the 1990s, these reserves were preserved for nearly two decades before extraction began in the 2010s.
According to Russia’s Federal Agency for Subsoil Management, the cluster has an estimated 500 million tons of reserves, equivalent to 8.6% of all profitable reserves in the country.
The deal will include the gigantic Vankor (nearly 500 million tons), Lodochnoe (73 million tons, launched in 2019) and Tagulskoe (45 million tons) fields. To these will be added the Payakhskoe field, a joint project between Rosneft and Yermak Neftegaz, and the Vostochno-Taymyrskoe field. These will all be combined into a single legal entity – Vostok Oil – of which shares will be sold.
Based on the reserves, the entire project is worth an estimated $15 billion. Whereas in summer there was talk of selling 40%, sources told Vedomosti that only 15-20% is being discussed now. The deal could therefore be worth $3-7 billion. However, there are not yet any agreements regarding the amount or the structuring of the deal.
Investors from South-East Asia are “queuing up” to buy shares, another source told Vedomosti. He noted that China has already been offered a share, and talks with India began in autumn.
A Rosneft delegation led by CEO Igor Sechin visited the countries in mid September. Local companies reportedly “confirmed their interest in possible involvement in the Vostok Oil project”.
All buyers have insisted on tax concessions, since the oil fields are in the Arctic Circle. Rosneft has appealed to Russian President Vladimir Putin directly to grant these concessions.
The project requires exemption from severance tax, tax rebates on the investment amount, and zero property and land tax, a total of $40.77 billion in concessions over 30 years.
“Without tax incentives, developing the sites is technically possible, but pointless from an economic perspective,” a federal official pointed out. The project’s strategic partner is more likely to be needed to provide new markets, he added.