Rosneft Completes Deal with Beijing Gas Group
Russian state-controlled oil group Rosneft said June 29 it has completed its $1.1bn deal to sell a 20% stake in east Siberian upstream gas subsidiary Verkhnechonskneftegaz to Beijing Gas Group, as initially announced November 2016.
The Chinese company acquires a stake in one of the largest producing fields in eastern Siberia with developed infrastructure and access to the ESPO pipeline, while Rosneft gets an opportunity to enter China’s prospective domestic gas market, including end users via swap gas supplies. Rosneft noted that the project's valuation, at $3.2/barrel of oil equivalent based on 2P reserves, proves the high potential of Verkhnechonskneftegaz's resources.
Rosneft added that, given the Chinese government's decision to transfer Beijing's electric power from coal to gas and to speed the switchover of many of China's vehicles to natural gas as a motor fuel, the deal opens up broad prospects for its gas business in China.
Beijing Gas Group (part of Beijing Enterprises Holdings) sold 14.38bn m3 of gas in 2016, up 10% on the previous year, due to a steady increase in gas demand for power generation and heating and cooling. During the recent winter, it was supplied with 10 LNG cargoes (0.9bn m3 gas) by France's Engie.
Mark Smedley