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Tuesday, 13 December 2016

Rosneft buys stake in Zohr concession

Rosneft buys take in Zohr: Russia’s Rosneft has bought a 30% participating interest in Eni’s Shorouk offshore concession, where the Zohr supergiant is located. Rosneft will pay Eni USD 1.125 bn for the stake and include a pro quota reimbursement of past expenditures amounting to USD 450 mn, according to Eni’s statement, with Rosneft having the option to buy a further 5% stake under the same terms. Eni had diluted its holdings of Shorouk to 90% after selling 10% to BP and says the transaction with Rosneft confirms the success of its “‘dual exploration model’ which, in parallel with an accelerated development of the hydrocarbons reserves, aims at early monetization of the value through the dilution of the high participating interest owned in huge exploration discoveries.” The transaction is subject to the fulfillment of certain standard conditions, including regulatory approval in Egypt. First gas from Zohr is expected by the end of 2017. Ildar Davletshin, an oil and gas analyst at Renaissance Capital, told Bloomberg the price “is reasonable for big fields in an attractive location.”

Sharkawy & Sarhan Law Firm advised Eni on the sale to Rosneft as well as the earlier sale of a 10% stake in the Shorouk concession to BP.

Rosneft has also said President Abdel Fattah El Sisi “has offered to consider the company’s participation in development of other fields both on the shelf and on land,” Sputnik says, citing Rosneft CEO Igor Sechin. Sechin also he met El Sisi to deliver a message for Russian President Vladimir Putin on the development of trade and economic ties and implementation of a number of projects in the energy sector between our countries.

Does Qatar now hold an indirect stake in Zohr? Earlier during the week, Qatar Investment Authority (QIA) and commodities trader Glencore had signed an agreement to buy a 19.5% stake of Rosneft, Reuters reported. The transaction, which is expected to see some USD 11.37 bn flow into Russia’s state coffers, is expected to be closed by mid-December. Italian bank Intesa Sanpaolo is major creditor for the sale and will, along with a syndicate of four or five key banks, provide EU 7 bn in financing, with Intesa Sanpaolo covering “significantly over 50 percent” of it.

Roseneft’s purchase of the Zohr stake and the Glencore / QIA transaction suggests Rosneft appears to have some “spare money,” says Alexey Bulgakov, a fixed income analyst at Sberbank CIB. That means Rosneft will not have to finance a buyback of its own shares, Bulgakov says. Davletshin told Bloomberg “the Egyptian gas project could make sense for a Rosneft venture with Glencore and Qatar’s sovereign wealth fund due to their expertise in natural gas.

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