On Jun 19, BP plc BP and Rosneft inked multiple agreements at the St. Petersburg International Economic Forum to strengthen their long-term strategic relationship.
Rosneft and BP also signed a final binding agreement. Per this deal, BP will purchase 20% share of Taas-YuryakhNeftegazodobycha (“Taas”) from Rosneft, which will form a new joint venture in East Siberia.
One of the largest fields in eastern Siberia – the Srednebotuobinskoye oil and gas condensate field – will also be developed by the venture. The field currently yields about 20,000 barrels of oil per day.
Taas venture will also work on the development of appropriate infrastructure for greater exploration and evolution of the region’s reserves. Moreover, Rosneft and BP will together carry out the exploration of a related Area of Mutual Interest (“AMI”) in the region, spanning across about 115,000 square kilometers.
The companies have also decided to explore two additional AMIs in the West Siberian and Yenisey-Khatanga basins, which cover an area of about 260,000 square kilometers. This agreement requires BP and Rosneft to conduct joint studies which, upon success, will need the companies to form new joint ventures to acquire licenses and conduct explorations.
Rosneft will own 51% and the remaining 49% will be held by BP if any joint venture is formed. Per the agreement BP and Rosneft need to form a joint venture to conduct further appraisal work on the Baikalovskiy field inside the Yenisey-Khatanga AMI, which was discovered by Rosneft in 2009. The exploration activities in the two AMIs comprise screening studies, attainment of seismic data, and drilling of exploration wells with the addition of new licenses.
Keeping in line with the Forum’s framework , both the companies signed a “heads of terms” to pursue restructuring of the German Ruhr Oel GmbH (“ROG”) refining joint venture. The document foresees reorganization of the venture by dividing between the parties shares in four refineries and related infrastructure.
Consequent to the planned deal, Rosneft will increase shareholding by twofold in many of its assets – to 25% from 12.5% in the Bayernoil refinery, to 24% from 12% in the MiRO refinery, and to 37.5% from 18.75% in the PCK Raffinerie. In return, BP will merge 100% of the equity of the Gelsenkirchen refinery and the solvent production facility DHC Solvent Chemie. The closure of the deal is subject to the fulfillment of conditions precedent and regulatory approvals.
The reorganization of Ruhr Oel GmbH will allow BP and Rosneft to concentrate on their refining and petrochemicals strategies in Germany once again.
BP currently carries a Zacks Rank #1 (Strong Buy). Some other stocks from the same space that warrant a look are Transmontaigne Partners L.P. TLP, EQT Midstream Partners, L.P. EQM and LRR Energy, L.P. LRE. All these stocks sport the same Zacks Rank as BP.
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