Novatek continues spending spree in Western Siberia
Thursday, Dec 14, 2017
Russia’s Novatek has bought three more natural gas and condensate fields in Western Siberia as it looks to prop up flagging production levels with new acquisitions.

The Moscow-based independent announced on December 6 that it had purchased two companies – South-Khadyryakhinskoye and Eurotek – from AR Oil and Gas (AROG), a Netherlands-registered joint venture between Spain’s Repsol and Russia’s Alliance Oil.

South-Khadyryakhinskoye has exploration and production rights to a field of the same name in the Purovsky district of Yamalo-Nenets. It lies adjacent to Novatek’s North-Khancheyskoye field, which is currently under development. South-Khadyryakhinskoye held 228 million barrels of oil equivalent in C1+C2 reserves at the end of last year.

Eurotek controls rights to the Syskonsynyinskoye field, some 120 km northwest of Nyagan in the Khanty-Mansiysk region. The deposit, which stores 48 million boe in C1+C2 reserves, was brought on stream in February 2013 and flowed 799 mcm of gas and 6,600 tonnes (162 bpd) of condensate in 2016.

Novatek did not comment on the value of the deal.

The gas company is eyeing new assets in the Yamalo-Nenets, where its core operations are based, as a means of lifting production levels. Its hydrocarbons output slumped 7.5% to 1.37 million boepd in the first nine months of the year, owing to natural decline at its mature fields.

Novatek completed the purchase of a West-Yaroyakhinskoye, another field in Yamalo-Nenets, in late November. The producer is also interested in the non-core gas assets of Russian diamond miner Alrosa, according to sources quoted by Vedomosti.

AROG was set up by Repsol and Alliance Oil in early 2013, and a year later, Alliance was bought by Independent Petroleum Co. (NNK), a private oil company controlled by former Rosneft president Eduard Khudainatov.

NNK wants to raise cash from divestments in order to settle its debts. In April, it sold Kondaneft, the owner of a group of fields in Khanty-Mansiysk, to Rosneft for 40 billion rubles (US$676 million). According to reports in the Russian press, the company is looking for a strategic investor, having entered into talks with companies from China, the UAE and Qatar. NNK has a net debt of around US$2.1 billion, with a debt to EBITDA ratio of 4.45. The company was targeted by US sanctions in June for allegedly selling fuel to North Korea, further impairing its financial position.

Repsol operates dozens of licences in the Western Siberian and Volga-Urals petroleum basins, although its output in Russia is relatively low, at 11,000 bpd of oil and under 400 mcm of gas last year. With the latest sale, the Spanish major may be looking to raise cash to finance development of the Ourinskoye field in Khanty-Mansiysk. Repsol has partnered up with Gazprom Neft to bring the deposit, which contains 235 million barrels in C1+C2 oil reserves, into production.

In a separate statement on December 11, Novatek revealed it had struck a deal to buy the Chernichnoye field in Yamalo-Nenets from local producer Mangazeya, owned by Russian businessman Sergey Yanchukov, for an undisclosed sum. The field, which holds 179 million boe in C1+C2 reserves, is seen reaching a peak output of over 550 mcm per year by 2022. Yanchukov suggested in 2015 that the deposit’s resources could be used for the on-site production of methanol and urea. Novatek said it expected to close the transaction in early 2018, noting that it owned infrastructure in close proximity to the Chernichnoye field.

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