Rockefeller buys into Russian oil business..Russia revives $5B Yamal-Europe pipeline project
Stephen Clark Rockefeller’s UK-based oil company has reached an agreement with VTB Bank to purchase a 100% stake in Tehneftinvesta for $1 billion.
VTB Capital facilitated the sale which gives Rockefeller Oil over 180 million tonnes of oil reserves, and 20 billion cubic meters of natural gas, Kommersant newspaper reported on Thursday.
Vitaly Kryukov, an analyst at IFD Kapital, thinks the $1 billion price tag is fair, and “within the market limit”. Rockefeller will pay, on average, $0.78 per barrel.
While the price is fair, the big sale has prompted many analysts to scratch their heads and ask the obvious question: why an American company, and not Russian?
Kryulov is sure VTB has already offered the deal to local oil magnates, but the purchase by Rockefeller indicates they all turned it down.
According to Kryukov, the sale of Tehneftinvesta would pose too large a risk to smaller Russian companies. If the reserves do not produce their expected output, it would wipe out a small company, whereas a larger, more powerful Rockefeller could withstand such a problem.
According to him, there are many small companies in the market, but their purchase entails some risks, because the reserves and the wells’ flow rate could prove to be significantly less than predicted. But if the reserves prove to be plentiful, it could be a fruitful investment.
“It is alarming that none of the Russian oil producers, despite the attractiveness of the region and good reserves, is interested in Tehneftinvesta,” said Kryukov.
The Rockefeller oil company is not a novice in the Russian market. In 2012, Rockefeller’s BESS expressed interest in purchasing a 51% stake in CJSC Geotransgaz, and offered $612 million for the Urengoi Gas Company, from Alrosa and VTB. The deal was never completed and Alrosa decided to develop the gas reserves independently from Rockefeller Oil.
The Tehneftinvesta reserves are located in the Yamal-Nenets and Khanty-Manissisk regions of West Siberia.
The territory is currently comprised of 7 blocks, 6 of which are open, 5 are oil, 1 gas. All drilling licenses expire in 2025.
Neither VTB nor Rockefeller Oil have commented as of early Thursday.
Gazprom’s Yamal-Europe 2 pipeline project, which will require around $5 billion of investment to construct the second branch of the gas route to East Europe could be completed by 2019.
Russian President Vladimir Putin spoke on returning to the project at a meeting with the head of Russia’s gas major Aleksey Miller.
“We have almost begun work on South Stream and I would ask to return to the Yamal-Europe 2 project,”Putin said at the meeting, adding it is essential for “improving reliability of gas supplies to Poland, Slovakia and Hungary.”
Miller said the project could be completed by 2018-2019, after work on the South Stream is finished. It’s expected to have a maximum capacity of 15 billion cubic meters.
He also added that transit via the Yamal-Europe 1 pipeline is currently the most economically effective gas route, as the transit system in Belarus, unlike in other transit countries, belongs to Gazprom and the ground beneath it is on a long-term lease. The capacity of Yamal-Europe 1 pipeline is about 33 billion cubic meters.
In view of the ‘gas war’ between Russia and Ukraine, Gazprom took a decision to build alternative routes around Ukraine. Among the two possible alternatives was the construction of the Nord Stream (estimated cost $6 billion) through the Baltic Sea and the construction of the second thread of the Yamal-Europe pipeline.
and thats how the game plays out..the same groups end up owning the resources..and when you have a product that everyone wants..you use it for all its worth..