PF Archive

Elections set to cloud better financing conditions in Russian oil and gas

03 11 2011

Russia has a tempestuous record in accommodating foreign oil and gas investment, which makes the senior debt agree­ments for the Nord Stream 2 and Yuzhno-Russkoye projects, both closed this year, all the more impressive. Nord Stream, the second stage of the $8.8 billion twin 1,220km gas pipe-line running between Russia and Germany under the Baltic Sea was the first to close. Yuzhno-Russkoye – a Eu1.3 bil­lion ($1.2 billion) oil and gas field pro­ject to tap into reserves of around 833.5 billion cubic metres of gas – soon followed. These two deals were particularly symbolic giving the concurrent high-profile collapse of a pro­pos­ed alliance bet­ween BP and state-owned company Rosneft. The partnership was plunged into disarray after disputes bet­ween BP and its fellow shareholder in the TNK-BP 50/50 joint venture, Alfa-Access-Renova, regard­ing what rights the company had over explor­a­tion rights in Russia. The dis­pute de­rail­ed the agree­ment with Ros­neft, which covered the East-Prinovoz­emel­sky field, and Rosneft sub­se­quently signed a new agreement for the field with ExxonMobil. Vladimir Ryashin, a Moscow-based oil and gas adviser at Instock, believes the fallout from this was the biggest challenge of this year for the market. “In spite of strong support for the Russian government the two com­pa­nies were not able to finalise the agree­ment, because of the protest of Russian shareholders of TNK-BP,” he says. Outside edge The messy dispute over the Rosneft venture within TNK-BP, which recalled the 2008 dispute between the TNK shareholders, could have darkened the hopes of outside investors in Russia....