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Russia's Rosneft enters into Shorouk gas field project in Egypt

December 12, 2016, 16:58 UTC+3

The deal has been signed, according to Chief Executive Officer of Rosneft Igor Sechin

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© AP Photo/Mikhail Metzel

CAIRO, December 12. /TASS/.Russia’s top oil producer Rosneft has entered into the project on the development of Shorouk gas block in the Egyptian offshore area (part of Zohr gas field), Chief Executive Officer Igor Sechin said Monday, adding that the deal had been committed to paper.

"The source of financing will be found taking into consideration the company’s financial responsibility. The deal has been signed, there is a profile of payments and we can say that starting from today we’re participating in the project," he said.

Rosneft’s aggregate investments in Shorouk project will total $4.5 bln in four years, the company reported.

According to Sechin, Rosneft will also study the proposals made by Egyptian President Abdel Fattah al-Sisi on the company’s potential participation in new projects on the development of offshore and onshore blocks. "Egypt’s President Abdel Fattah al-Sisi has proposed to consider the company’s participation in the development of other offshore and onshore blocks," Sechin said, adding that "Rosneft will thoroughly study the proposals."

Sechin also said that he had passed along a message from Russian President Vladimir Putin to Egyptian President Abdel Fattah al-Sisis on the expansion of trade and economic cooperation and the implementation of a number of energy projects between the countries.

"As a representative of the company (Rosneft) I’ve asked Egypt’s President to support the company’s entrance into the Zohr zone (Zohr field - TASS) in the Egyptian offshore area. The consortium, which implements the project jointly with Egyptian partners, comprises such companies as BP and Eni, and will now comprise Rosneft," he said.

According to Sechin, Abdel Fattah al-Sisi approved all areas of cooperation with the company. "As you know we supply petroleum products, liquefied gas and LNG to Egyptian consumers. President of the Arab Republic of Egypt has approved all cooperation areas and passed an opinion that the company’s operations would stabilize the project’s development and help bring additional synergy for Egypt," he said.

Earlier on Monday, Rosneft reported that on December 7, the board of directors had approved the acquisition of a stake in Shorouk from Eni for $2.8 bln. In particular, the board approved the purchase of 30% in the Shorouk concession agreement, as well as the acquisition of 15% in a joint venture, set up by IEOC Production B.V. and Egyptian Natural Gas Holding Company, which is the operator of the project on the stage of development.

Rosneft also has an option to acquire 5% in the concession agreement and 2.5% of the joint venture before December 31, 2017. The transfer of shares should take place within one year since the signing of the agreement, full payment should be made not later than May 31, 2018.

Italy’s Eni said that it is selling the interest via its subsidiary IEOC, which currently holds 90% in the block, following the recent dilution of 10% to BP, which is now being completed. "The agreed conditions include a consideration of $1,125 mln and the pro quota reimbursement of past expenditures, which amount so far at approximately $450 mln. The completion of the transaction is subject to the fulfillment of certain standard conditions, including all necessary authorizations from Egypt’s authorities, the company said.

The Zohr field, located in the Shorouk Concession, was discovered by Eni in August 2015 and is the largest natural gas field ever found in the Mediterranean, with a total potential of 850 billion cubic meters of gas in place. On February 2015, the authorization process for the development of field was completed, while the first gas is expected by the end of 2017.

LNG supplies

Egyptian partners are primed to extend the contact with Rosneft on LNG supplies, Sechin said.

In May 2016, the company delivered the first LNG cargo in accordance with the contract with Egyptian Natural Gas Holding Company made in August 2015. "We have a contract in force, which we’re completing. This year we’ve supplied three cargoes, and will supply one more by the end of the year. Egyptian partners are primed to extend the contract, and so we are," Sechin said, adding that if it is necessary to expand supplies they would be agreed and organized under due consideration of mutual interests and demands.

Earlier in August it was reported that Rosneft had received 1 bln rubles ($15.6 mln) for its first ever supply of liquefied natural gas to Egypt under the contract with Egyptian Natural Gas.

Egyptian Natural Gas Holding Company is in charge of strategic development of the country's gas sector. Egypt is the ultimate leader among African states in terms of gas consumption.

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