7 Sep 2010 18:12

Gazprom may sell 51% of SeverEnergia to NOVATEK, Gazprom Neft JV

MOSCOW. Sept 7 (Interfax) - Gazprom may sell a 51% stake in SeverEnergia to a joint venture between NOVATEK and Gazprom Neft , Yamal Development LLC, several sources close to the participating companies told Interfax.

The deal is in the advanced stages. It is awaiting approval from the Gazprom board of directors, one of the sources said. The deal has already received clearance from the Federal Antimonopoly Service, the source said.

"Gazprom's leadership has made the decision to sell a 51% stake in the SeverEnergia joint venture to a joint company between Gazprom Neft and NOVATEK," a Gazprom spokesman told Interfax.

"This decision is part of the strategy of Gazprom's oil division, and the need for rational use of deposits and optimization of the process of developing company SeverEnergia fields. Gazprom Neft's participation will make it possible to develop oil reserves in the various component horizons of the fields. NOVATEK's participation will provide synergies from use of existing infrastructure for treating gas condensate: this will significantly accelerate the commencement of commercial production at the fields and reduce capital expenditure on the project," Gazprom said.

A Gazprom Neft representative said the deal would facilitate development of liquid hydrocarbon reserves in Yamalo-Nenets, noting that over 40% of SeverEnergia's reserves are oil and condensate.

"Operations at SeverEnergia fields will make it possible to achieve synergies with other Gazprom Neft projects in the region: Novoportovskoye and Messoyakhinskoye. We expect optimization of spending on transportation infrastructure. It creates the possibility for further expansion of the resource base in northern Yamalo-Nenets autonomous district, which is the most promising region for growing oil production given the prepared resource base and developed infrastructure. Development of Yamalo-Nenets autonomous district will be a new growth area for Gazprom Neft and enable it to make a substantial contribution to implementation of the company's long-term growth strategy," he said.

A NOVATEK spokesman commented: "The fields are located in Yamalo-Nenets autonomous district near existing transportation infrastructure and NOVATEK refining capacity. The planned acquisition dovetails with the company's strategy of boosting reserves and production."

The main issue is the price of the deal. Gazprom closed the deal to purchase its stake in SeverEnergia last September for $1.6 billion. Gazprom's internal rate of return requirement for gas production is 15%. By that standard, the asset must be worth at least $1.84 billion today.

"After the board of directors approves the deal Gazprom will be compensated not only for the cost of the 51% stake in SeverEnergia but will retain control via its stake in Gazprom Neft (95.98%) and in NOVATEK (19.39%)," the gas giant said.

SeverEnergia's fields are located in Yamalo-Nenets autonomous district, the traditional area of operation for NOVATEK and Gazprom Neft. That will make it possible for Yamal Development to make effective and timely decisions on personnel and technical issues when developing the SeverEnergia fields, while existing infrastructure at the fields simplifies operations.

Condensate from SeverEnergia fields can be processed at NOVATEK's Purovsky stabilization plant, the only one in the region. SeverEnergia had previously asked to use the NOVATEK plant on a give-and-take basis. However, one source told Interfax, NOVATEK preferred to buy the unstable condensate, since the price of stable condensate is much higher.

Gazprom Neft wants the deal because it will boost production, in line with the company's ambitious growth plans, and will add significant reserves, the participants in the deal said.

SeverEnergia includes former Yukos producers Arcticgas, Urengoil and Neftegaztekhnologia. They were acquired initially by a consortium of Italian Eni and Enel. Gazprom later purchased a controlling stake from them. Production at the Samburskoye field is slated to commence in 2011.

SeverEnergia's ABC1+C2 resource totals 568 million tonnes of oil, 155 million tonnes of condensate and 1.3 trillion cubic meters of gas. It holds the licenses to the Samburgskoye, Yevo-Yakhinskoye, Yaro-Yakhinskoye and Severo-Chaselskoye fields.