Sibneft, Sibur establish a natural gas processing JV

By OGJ editors

HOUSTON, Jan. 24 -- Russia's Sibur Co. and OAO Sibneft have signed a memorandum of understanding to establish a natural gas processing joint venture—to be called CJSC Noyabrsk Gas Energy Co. (NGEC)—which will be based at the Muravlenkov gas processing plant and compressor station in the Noyabrsk region of the Yamal-Nenets Autonomous District of Russia.

Based on the agreement, Sibur will hold a 51% stake in the joint venture, while Sibneft will own 49% of the company. The JV's profits, however, will be split evenly between the firms.

"NGEC will focus on more effectively utilizing associated gas, improving processing quality, and increasing sales volumes. The company will also be involved in the development of electric power generation," the companies stated.

"The creation of joint investment, technology, and marketing policies by these two major Russian companies will boost available resources, expand product lines, enhance investment effectiveness, and increase supplies to this petrochemicals enterprise," the companies explained.

For the remainder of January, specialists within Sibur and Sibneft will determine the amount of capital that will be required to "develop a more detailed outline of the organizational structure" of the JV.

"The MOU outlines the sale of both associated gas and gas condensate at "mutually agreed prices" between the firms. "The infrastructure of Sibur's affiliate, Sibur-Tyumen, will be used to transport NGEC products such as tank gas and liquefied gas," the companies said.

Dmitry Mazepin, president of Sibur, noted that this partnership with a major oil producer "broadens the range of possibilities for the petrochemicals company in terms of processing and utilizing dry gas." He said, "Now, Sibur will be able to use gas to independently generate electricity. For us, this is a new business that will create additional sources of revenue, while the future diversification of our business could be an important factor in competing in the petrochemicals industry."

"This is Sibneft's second major natural gas project, following the development of the Zapadno-Ozernoye field in Chukotka," said Sibneft Pres. Eugene Shvidler. "This latest agreement will ensure more effective use of associated gas. In the future, we plan to aggressively expand the natural gas segment of our business."

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