The Kremlin found an investor for the last major oil field

Special condition

The auction to sell the government a license to develop Elginskogo oil field (read more about the field, see the help) is scheduled for the II-III quarter of this year. May 25, Prime Minister Dmitry Medvedev approved the rules for trading. The starting fee will be equal to 5.35 billion rubles. the auction Winner will be obliged to start development of the Deposit not later than two years from the date of obtaining the license and process all extracted oil in Russian refineries.

But, as found RBC, the government at the request of the Kremlin, most likely, will push the winner one more essential condition.

Available RBC was a copy of the letter of the head of the Russian direct investment Fund (RDIF) Kirill Dmitriev President Vladimir Putin on the development of Elginskogo field. Dmitriev asks the President to oblige the winner of the auction to attract a minority partner with the necessary experience and legally binding agreement worth at least $4 billion of financing long-term projects in Russia.

In the same letter, Dmitriev explains Putin of which the minority partner is involved. This is a sovereign Arab Fund Mubadala, which RDIF has created in 2013 a consortium. According to Dmitriev, Mubadala is willing to invest in projects in Russia $7 billion (for more details see reference). One of them — development Nadymskogo deposits, where the share of Mubadala does not exceed 25%, according to Dmitriev Putin. According to the source of RBC in the Ministry, the consortium purchased Nazymskoye Deposit with reserves of 4.5 million tons of oil on C1 and 53 mln tons on C2 at the beginning of the current year.

“After exploring all possible options of further development of the consortium, the priority is the joint development of Elginskogo subsoil area,” admits Dmitriev in the letter. He reported to Putin that the Arabs can provide not only funding, but also the professional competence to work in this field, containing tight oil reserves.

On may 23, the President put a resolution “Agree” and instructed the Ministry of natural resources to work the project.

Putin’s press Secretary Dmitry Peskov and the Ministry declined to comment. Request to the Fund Mubadala also remained unanswered. The representative of the RDIF declined to comment.

What will the Arabs

Elginskoe oil field in Western Siberia is one of the largest explored deposits in Russia and is part of the Priobskoye field, different parts of which are already developing “Rosneft” and “Gazprom Neft”. Its reserves by category C1+C2 ” amounted to 103 million t. For comparison, the reserves of them. Trebs and them. Titov, who develop “Bashneft” and LUKOIL, are estimated at 140 million tons of oil reserves in the Vankor field of Rosneft, the largest in Eastern Siberia, and 500 million tons of oil and condensate and 182 billion cubic meters of gas. Square put up for auction of land – 762,8 sq. km.

The Minister of natural resources Sergey Donskoy said in March that interest in Aginskom deposits show “Rosneft”, “Gazprom Neft, NOVATEK, LUKOIL, “Surgutneftegaz” and “Independent oil and gas company” (NOC).

According to another official of the Ministry, the offer, the FUND may reduce the interest in the field and, as a result, state revenues from the sale of licenses for development of mineral resources. The interlocutor of RBC said that the Ministry is preparing a response to Putin, where this risk will be listed, and the final decision rests with the President. Employee of the Committee adds that the introduction of additional terms in the documentation of the auction it will take time because of what the auction may be postponed.

The representative of Deputy Prime Minister Alexander Khloponin told RBC that the order of the President being studied and about the specific terms of the auction say it is premature. Press Secretary, Natalya Timakova was unable to immediately provide a comment.

Representatives of the companies-applicants refused to comment on RBC plans to participate in the auction and a possible partnership with the Arab Fund. “Rosneft” in 2014 is there a strategic cooperation agreement with Mubadala. It provides for potential participation of Mubadala Petroleum in the development of the oil fields of Rosneft in Eastern Siberia and Rosneft participation in international projects Mubadala Petroleum. In March 2016, the press service of the Kremlin before Putin’s meeting with crown Prince of Abu Dhabi Mohammed bin Zayed al Nahyan reported that “Gazprom” and “Rosneft” interested in the prospects of cooperation with companies from UAE.

A person close to the FUND, said that the Russian Fund is open for cooperation with Russian oil companies.

Senior analyst at UBS Maxim Moshkov believes that the involvement of the Arab minority shareholder in the project Elginskogo field will not deter the bidders, because the proportion of 25-49% in the project gives the investor the right to receive dividends but not the asset management. According to him, between members of the project possible additional agreement providing for the sharing of oil or its sale, and the terms of redemption of one of the parties shares of another in the project. In the current economic environment and considering sanctions against Russia, external financing do not interfere or “Rosneft” or “Gazprom oil”, which is called the favorites of the auction, said the expert. In his opinion, the price for the asset at the end of trading may exceed the starting five times.

The head of the Fund of national energy security Konstantin Simonov considers that in its decision the President wanted to prove that Russia has economic partners, despite sanctions, and Russia otkrity for investment. However, the partnership with UAE may cause discontent of the Chinese companies, which are strategic partners of “Rosneft” and “Gazprom” in large projects and also would be interested in developing Alanskogo field, the expert said.

Mubadala invests in what

In the fall of 2015 Mubadala Development (subsidiary of Mubadala), together with the RDIF and other investors bought from “SIBUR” 100% of the terminal for transshipment of liquefied hydrocarbon gases (LPG, capacity – 4 mln tons per year) in the port Mouth of the Luga. According to the CEO of RDIF, Kirill Dmitriev, the amount of the transaction amounted to more than $700 million In March 2016 Mubadala Development and RDIF bought two warehouses of 200,000 square meters in the suburbs of the PNK group for $100 million, the Arab Fund also were interested in participation in the development of East Siberian deposits “Rosneft”, including the purchase of about 20% in TAAS-Yuryakh” (in the end a share of the company went to Indian investors). CEO of “Rostec” Sergey Chemezov in April 2016 Mubadala Development called one of the contenders for 20-25% of the holding “Helicopters of Russia”. Mubadala is also among the bidders for the purchase of tower infrastructure “VimpelCom” (10,000 towers), wrote “Vedomosti”. The deal is not yet completed.