Russia's largest oil producer, Rosneft, and petrochemical company Sibur Friday reached an agreement under which the oil producer will sell its 49% stake in a gas processing joint venture to Sibur and guarantee supply of up to 10 billion cubic meters a year of associated gas to the facility.
The two companies have agreed that Sibur "will purchase a 49% share in the Yugragazpererabotka joint venture from Rosneft, increasing its interest in the joint venture to 100%," the companies said in separate statements.
Yugragazpererabotka is a joint venture that owns and operates three gas processing plants -- Nizhnevartovskiy, Belozerniy and Nyagangazpererabotka -- along with the pipeline infrastructure that transports associated gas from compressor stations to the plants. The total capacity of Yugragazpererabotka's processing plants is 13.4 Bcm/year.
The deal will be closed subject to all the necessary approvals.
The price of the deal has not been revealed, but a spokeswoman at Sibur said the petrochemical company considered the purchase price "fair."
"The price takes into account investment TNK-BP made in expanding and modernizing the assets after the JV was set up in 2007," she said.
Rosneft bought TNK-BP in March 2013.
SUPPLY DEAL
The two companies also agreed "to increase guaranteed supplies of associated gas from Rosneft's oil fields to Yugragazpererabotka's processing facilities to 10 Bcm/year for the period through 2032," the two companies said.
The increased guaranteed supplies will start once the deals are completed after receiving necessary approvals, the spokeswoman at Sibur said.
Previous supply agreements envisaged guaranteed supplies of associated gas of 6.6 Bcm/year by 2017 and 9.3 Bcm/year from 2017, she said.
Meanwhile, actual gas supplies were 12.5 Bcm in 2012, she said.
The new deal envisages that the gas price will be formula-based and indexed in line with changes in prices for associated gas derivatives -- dry gas and raw natural gas liquids, the statements said.
Under this agreement, Sibur will sell dry gas produced at the Nizhnevartovskiy and Belozerniy gas processing plants to Rosneft.
Rosneft has undertaken not to invest in projects that might have a negative impact on the composition of the associated gas supplied to Yugragazpererabotka. Sibur guarantees it will process of all the volumes supplied by Rosneft and will expand its two compressor stations.
Liquids obtained from processing the gas will be shipped to Sibur's petrochemical facility at Tobolsk. The agreement was signed by Rosneft CEO Igor Sechin and Sibur CEO Dmitry Konov. The agreement is "perfectly in line with our gas strategy as it will help us monetize Rosneft's gas potential, hit the 95% target ratio of associated gas utilization across Rosneft's fields, and produce high value added gas-derived products," Sechin said in a statement.
In turn, Konov said: "By signing the agreement with Rosneft to increase associated gas supplies, Sibur reaffirms its commitment to the corporate strategy of securing long-term access to feedstock."
"The extended term of the associated gas contracts highlights the strong ties between Sibur and Rosneft which remains the key associated gas supplier to Sibur's gas processing facilities," he said. "Sibur will continue offering Rosneft an effective solution for using associated gas while securing a steady flow of valuable petrochemical feedstocks to its plants."
