LUKoil President Hopes to Reach Agreement with Rosneft over Severnaya Neft

'I hope that we can resolve the problem of Severnaya Neft with Rosneft,' LUKoil president Vagit Alekperov told journalists yesterday in St. Petersburg. 'LUKoil and Rosneft are partners and we don't want to allow a conflict to develop, but achieve a constructive dialogue instead,' he stressed.

On February 12 Rosneft officially announced that it was to put the finishing touches to a deal to buy 100% of Severnaya Neft's shares. The deal is worth USD 600 million. Talks regarding the deal have been going on since last autumn.

As Rosbalt reported earlier, Severnaya Neft won a tender for developing deposits in the Val Gamburtseva area in 2001. The company paid USD 7 million for the license, although other participants in the tender had offered USD 100 million, thus raising suspicions as to the fairness of the competition. The Russian Natural Resources Ministry then annulled the licenses. Nevertheless, the company began developing the fields and the Natural Resources Ministry is attempting to seize them back in the courts. The case has reached the High Arbitration Court's presidium, but the court has repeatedly postponed hearing it. 25% of shares in Severnaya Neft belonged to LUKoil subsidiary Komineft, but its share was diluted 10-fold. LUKoil's press office has announced that the company intends to defend its rights as a shareholder in Severnaya Neft which 'were broken by the company's management.'

Rosneft, which is 100% owned by the government, has significant stakes in Arkhangelskgeoldobycha (25%) and Polyarnoe Siyanie (20%), and is implementing, on equal terms with Gazprom, a project to develop the Prirazlomnoye and Shtokmanovskoye fields in the Barents Sea, which is unique in terms of the scale of investment. It is also constructing an oil refinery in Primorsk (Leningrad Region) jointly with Surgutneftegaz. Rosneft has an extensive network of filling stations in the Murmansk and Arkhangelsk Regions and an export terminal in Arkhangelsk.

Severnaya Neft has a license to develop 15 oil fields in the Timan-Pechora oil and gas province and extracts oil and gas in the Komi Republic and the Nenets Autonomous District. The total volume of the company's category C1 and C2 recoverable oil reserves is over 120 million tonnes. 5 licenses were received when the company was created in 1994, and 10 have been acquired in tenders and auctions. Since 2001 Severnaya Neft has produced commercial grade oil which it provides directly to Transneft's pipeline network. Severnaya Neft has its own pipeline system over 300 kilometres long. The company is significantly developing its production volume every year. In 2002 it increased production by 35%: 1.5 million tonnes of oil was recovered. In 2003 it plans to increase production by 1.5 times, and in 2005 to reach production of 6 million tonnes. In 2002 the company prepared and brought into trial exploitation two fields in the Val Gamburtseva area.

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