Rosneft and Beijing Gas Sign Binding Agreement
Rosneft and Beijing Gas Group Company Limited (hereinafter, “Beijing Gas”) signed a Purchase and Sale Agreement and a Shareholder and Operating Agreement for the sale of a 20% stake in Verkhnechonskneftegaz (a Rosneft subsidiary) to the Chinese company, an Agreement on the Area of Mutual Interest in respect of the adjoining license areas and an Agreement on the cooperation in the gas business.
The transaction execution agreement was signed in the presence of the Prime Minister of the Russian Government Dmitry Medvedev and Premier of the State Council of the People’s Republic of China Li Keqiang by Rosneft Chief Executive Officer Igor Sechin and Beijing Gas Group Chairwoman of the Management Board Li Yalan.
Legally binding documents were signed following the agreements reached by the companies in the course of the Russian President Vladimir Putin’s visit to China in June 2016 and provide for the base value of the acquired 20% share is c. USD 1.1 bln. The closing of the deal will be performed in accordance with the required procedures, including the obtaining of needed regulatory approvals.
The achieved evaluation is USD 3.2 per barrel of oil equivalent reserves (in terms of 2P category using PRMS method) and reflects high potential of the Verkhnechonskneftegaz’s resource base.
This transaction will allow Rosneft to fully implement the significant development potential of the Verkhnechonsk field, including gas production, and to confirm the strategic partnership with one of the largest distributors of natural gas in China.
Within the framework of the deal an integrated cooperation formation is being created: the Chinese company will obtain a share in one of East Siberia’s largest producing fields with a developed infrastructure and access to the ESPO pipeline; whilst Rosneft will obtain the possibility to access the local gas market of China, including end-customers, by means of swap supplies of gas.
The decision of the Chinese government to converse Beijing power generation from coal to gas and the accelerated transition of automotive transport of China to natural gas motor fuel open wide perspectives for a significant expansion of Rosneft activities in the Chinese market.
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