Norway's Equinor said Dec. 11 that it has completed an agreement with Russia's largest crude producer Rosneft to acquire a 49% interest in KrasGeoNaC, which holds 12 conventional onshore exploration and production licenses in East Siberia.
One of these 12 licenses included in the deal is North Danilovsky, where production launched in July. Output is expected to reach 40,000 b/d of oil by 2024, with subsequent plans to increase this to 70,000 b/d of oil, Equinor said.
Equinor said payment at completion of the transaction is around $550 million, which includes a cash consideration of $325 million at the effective date of Jan. 1, 2019, and customary adjustments.
"As part of this agreement, Equinor has redirected its remaining exploration commitments offshore in the Sea of Okhotsk and as such has no outstanding obligations in that area," the company said in a statement. .
Equinor (previously known as Statoil) has been active in the Russian market for 28 years, with current equity production 10,000 boe/d. It is a partner in the Kharyaga and North Komsomolskoye projects, as well as a pilot project for development at the Domanik formation.
The deal is the latest sign that Western companies remain interested in joining conventional oil and gas projects in Russia, after Shell joined a JV with Gazprom Neft to explore for and develop hydrocarbons on the Gydan peninsula in the Russian Arctic, and Trafigure took a 10% stake in Rosneft's major Vostok Oil project earlier this year.
In the early 2010s Rosneft signed strategic partnership agreements with Western majors including ExxonMobil, Eni, and Equinor (then Statoil). Plans included joint offshore exploration and production in the Arctic, as well as the Black Sea and the Sea of Okhotsk. These plans were derailed two years later when Western governments introduced sanctions against Russia over its role in the conflict in Ukraine, directly targeting certain types of oil production, including in the Arctic offshore. Volatile oil prices also reduced the projects' attractiveness.
The latest agreements indicate that Western partners are interested in playing a role in Russia's plans to ramp up development of its vast oil and gas resources in the east and Far North of the country, despite concerns about climate risks, high costs, and sanctions on some oil production in the region. The Russian government has approved tax breaks to incentivize major development plans including launch of new oil and gas projects, and boosting hydrocarbons shipments via the Northern Sea Route to Europe and Asia through Arctic waters.
