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. Last Updated: 07/27/2016

State to Divvy Up Offshore Projects

Itar-TassRosneft Chief Executive Sergei Bogdanchikov
The state is considering four options of dividing all new offshore oil and gas fields between Rosneft and Gazprom, Rosneft president Sergei Bogdanchikov said Tuesday.

"We don't know yet what decision on the issue will be taken by the state," Bogdanchikov said at a news conference in Yuzhno-Sakhalinsk. "There are several options. If I'm not mistaken, four of them." Gazprom and Rosneft have no deal on splitting future offshore projects, he said.

At a meeting with government officials, Putin last month approved a decision to split equally further continental-shelf projects between the two state-controlled energy giants.

The government will adopt a plan to divide the offshore resources by the summer, said Rinat Gizatulin, a spokesman for the Natural Resources Ministry. The new arrangement will not require amendments to the subsoil or continental shelf laws, he said.

Gizatulin and Nikolai Manvelov, a spokesman for Rosneft, declined to discuss the four options being considered by the government.

It appears that the new arrangement would become reality only after Russia passes amendments to the subsoil law, which will ban foreign control in strategic economic fields, including offshore deposits. The Cabinet is working amendments that it last reviewed at the end of January.

Deputy Natural Resources Minister Alexei Varlamov said the government would auction the next offshore oil and gas project, Sakhalin-3, only after the amendments took force. He predicted that the auction would happen by the end of 2007, speaking at a Feb. 15 meeting with Ben Haynes, president of ExxonMobil's Russian division.

In December, Rosneft and Gazprom signed a strategic partnership agreement to make joint bids for licenses and join forces in the production and delivery of oil, gas and electricity. The two firms have emerged from the dust of a failed merger, which collapsed in May 2005 amid a struggle over who would snatch up the main production unit of Yukos.

With the remainder of Yukos' assets up for auction this year -- and the fate yet unknown of several projects in which the state does not have a controlling stake -- Rosneft and Gazprom are expected to expand their respective empires as the Kremlin's national champions of choice.

Bogdanchikov on Tuesday said Rosneft was interested in bidding to develop Sakhalin-3, but said he had no idea when the tender would take place. He invited other Russian firms to join Rosneft in its offshore projects in the Far East, including Sakhalin. "In the Sakhalin projects, our partners represent all countries that are potential consumers of oil and oil products: India, China, Korea and Japan," he said. "But our partners in the Sakhalin projects do not include serious Russian companies. If at some point Gazprom comes into our project or a new one, we will only be happy, as we will be happy about Surgutneftegaz and LUKoil [as partners]."

Rosneft leads the Sakhalin-4 and Sakhalin-5 offshore projects, in which BP has stakes of 49 percent. Exxon's Sakhalin-1 is the last remaining Russian offshore project led by a foreign firm.