Company News: Russia approves plan for Gazprom-Rosneft merger

March 28, 2005
Russia has approved the plan for the merger of OAO Gazprom, the country’s giant gas monopoly, and OAO Rosneft, the state-run oil company.

Russia has approved the plan for the merger of OAO Gazprom, the country’s giant gas monopoly, and OAO Rosneft, the state-run oil company.

The merger, the biggest in Russian history, will allow the government to transfer its current 100% stake in Rosneft into Gazprom and increase its share of the world’s largest gas producer to 51% from its existing 38%.

In other recent company news:

• Petro-Canada agreed to obtain from UTS Energy Corp. a 60% stake in the Fort Hill oil sands project in northeastern Alberta in exchange for an initial $300 million (Can.) payment and 60% funding of future development costs. Both companies are based in Calgary.

• Forest Oil Corp., Denver, agreed to acquire a private company whose primary asset is 83% interest and operatorship of Buffalo Wallow natural gas field in the Texas Panhandle.

• Candax Energy Inc., a private Toronto independent, agreed to buy Tunisian producing properties from Centurion Energy International Inc., Calgary, for $41.2 million.

• Shell Development (Australia) Pty. Ltd. has sold its interests in Laminaria and Corallina oil fields, adjacent AC/P8 exploration acreage, and the Northern Endeavour floating production, offloading, and storage vessel (FPSO) to Woodside Energy Ltd. and Paladin Oil & Gas (Australia) Pty. Ltd. under separate agreements.

• The offer allowing private investors to buy Statoil ASA shares has been successful. The company currently has registered more than 11,000 new shareholders, increasing the number of owners by 20%, of which 97% are private investors or companies registered in Norway.

• A joint venture of Alamo Resources LLC, Houston, and Palace Exploration Co., New York, has agreed to acquire a majority interest in Main Pass Block 59 in 60-70 ft of water 35 miles east of Venice, La., in the Gulf of Mexico.

• FirstEnergy Corp., Akron, Ohio, sold a subsidiary retail natural gas business to Amerada Hess Corp., in an attempt to focus on its core electric business.

• Newly public W&T Offshore Inc., Houston, set a 2005 capital budget to drill 30 exploratory and five development wells in the Gulf of Mexico and Gulf Coast region.


Not least, the deal will enable Moscow to assume control over expected increases of natural gas exports to the Asia-Pacific area through acquisition of Rosneft’s Far East interests-especially in the Sakhalin venture blocks.

Rosneft-Sakhalinmorneftegaz remains the largest oil production enterprise in Russia’s Far East, according to a company statement, providing Rosneft with 10% of its produced oil and 30% of its gas.

Russia’s Minister for Industry and Energy Viktor Khristenko said state officials and heads of both Gazprom and Rosneft had approved the merger, which should be completed by June.

The government did not release details of the agreement, but a Gazprom spokesman said the two companies would be merged under terms announced earlier this year.

Under those terms, the merger of Rosneft into Gazprom will likely exclude Yuganskneftegas, the main production unit of OAO Yukos which Rosneft acquired last year, leaving it as a stand-alone firm.

Petro-Canada oil sands deal

With Petro-Canada assuming operatorship of the Fort Hill oil sands project, the partners have yet to finalize a development plan that is expected to involve phases to expand bitumen production up to 100,000 b/d.

Petro-Canada Vice-Pres. Brant Sangster told reporters during a Mar. 1 news conference that proposed mining and upgrading facilities could cost a totl of $5 billion.

The company will seek regulatory approval for a new upgrader north of Fort McMurray, Alta., and the Alberta Energy and Utilities Board has already approved a Fort Hills mining project of 50,000 b/d of bitumen production. Mining is expected to start in 2009, and the new upgrader could become operational in 2010-11, Sangster said.

Forest, Buffalo Wallow

Forest did not name the private company but said the purchase price is $200 million and assumption of $30 million in debt. The deal is expected to close Mar. 31.

The acquisition involves 8,300 gross acres in Buffalo Wallow field, plus 25,000 gross acres of undeveloped land primarily in Wheeler County, Tex. The undeveloped property contains drilling targets in Granite Wash, Atoka, and Morrow formations.

Forest Pres. and CEO Craig Clark said Buffalo Wallow, developed on 40-acre spacing, has been approved for 20-acre spacing.

Forest said the deal will add proved reserves of 120 bcf equivalent and increase production by 25-30 MMcfed , beginning in April. The reserves are 71% natural gas and 46% proved developed.

Candax in Tunisia

Centurion’s ownership in the Mellita Permit in Tunisia and the accompanying farmout from Petro-Canada are excluded in the Candax deal, and Centurion will retain the right to participate for up to 50% of Candax’s working interest in any Triassic exploration well drilled on the Ezzaouia and El Bibane concessions. The sale is to close by Apr. 30.

Changing hands are a 31.4% working interest in the Ezzaouia concession, a 73.8% working interest in the El Bibane concession, an 80% working interest in the Robanna concession, and a 75% working interest in the Al Manzah concession. Each concession contains an oil field of the same name.

Also included in the purchase is the 50% share ownership in a power plant.

Production from the four fields totaled 1,200 b/d of oil and 4.4 MMcfd of gas as of Jan. 1, the effective date of the purchase. Centurion plans to concentrate on higher impact exploration and development projects, including those in Tunisia.

The sale leaves Centurion with production of 42 MMcfd of gas and 2,800 boed of condensate and natural gas liquids from the El Wastani development lease, 59 MMcfd from the South El Manzala development lease, and 590 b/d of oil from Hana field, all in Egypt, as of Jan. 1.

Shell divestment

Laminaria and Corallina fields are on Production License AC/L5 in the Timor Sea, 550 km northwest of Darwin off northern Australia.

The sales are pending Australian regulatory approval, and the combined sales price of $140.2 million is subject to adjustments for working capital and cash flow movements between the effective date and the expected close date in April.

In one agreement Woodside, operator of the Laminaria-Corallina project, will purchase an additional 16.67% interest in PL AC/L5 and will gain an additional 16.67% interest in the FPSO.

Paladin will acquire Shell’s remaining 8.33% interests in PL AC/L5 and Shell’s 15% interest in the adjacent exploration permit AC/P8.

Following the purchase, Woodside will own 66.67% of Corallina field and the Northern Endeavour, as well as a 59.9% interest in Laminaria field, which is unitized over PL AC/L5 and WA-18-L. Paladin’s fixed interest in Laminaria field will rise to 40.1% from 32.6%, and its interest in Corallina field and the Northern Endeavour will rise to 33.33% from 25%.

Woodside will drill an infill appraisal well in Laminaria field in the second quarter and an exploration well on the AC/P8 permit later this year. It has the option to buy Paladin’s interest in the Northern Endeavour at the end of the project.

Laminaria and Corallina fields, discovered in 1994 and 1995, respectively, averaged 31,000 b/d of gross oil in 2004 (OGJ Online, Nov. 15, 2004).

Statoil shares

After the Norwegian government’s sell-down last summer, Statoil experienced a strong increase in liquidity, and this trend is continuing with the change in ownership over the last few weeks.

Already this year, Statoil has had an average turnover of 14 million shares/day on the Oslo Stock Exchange, more than twice last year’s daily turnover. This makes the Statoil share more attractive for investors and is expected to have a positive effect on the company’s future valuation.

The Norwegian government now owns 70.9% of the shares and retains overall control of Statoil.

Alamo-Palace JV

A new sole-purpose entity, Alamo-Palace MP 59 LLC, will buy 86% of Ridgelake Energy Inc.’s interest for $69.5 million. The transaction is scheduled to close Mar. 31.

The property’s production of 2,600 b/d of oil and 600 Mcfd of natural gas had been shut-in since the producing facilities sustained damage during Hurricane Ivan last September. Repairs are essentially complete, and production recently resumed.

The acquisition involves varying working interests in 15 wellbores. Ridgelake Energy will retain a working interest in the block, which is operated by Chevron USA Inc. Alamo-Palace MP 59 LLC will propose additional development.

FirstEnergy sale

The subsidiary FirstEnergy Solutions supplies natural gas to about 1,900 commercial and industrial customers in selected areas in Ohio, western Pennsylvania, and West Virginia.

The value and other terms of the transaction were not disclosed due to a confidentiality agreement.

W&T spending

W&T plans to spend $94 million on 25 wells on the conventional shelf and on land, $56 million on six wells in the deep water, and $18 million on four wells on the deep shelf. It earmarked $98 million for completion, facilities, and other activity, not including acquisitions.

Its current production of 220-225 MMcfd is expected to rise as new projects come on line in the second half. Most of the firm’s deepwater prospects are scheduled for the fourth quarter.

At yearend 2004, W&T’s proved reserves rose 5% to 227.6 bcfe of natural gas, 49% proved, and 40 million bbl of oil, 51% proved.

The firm successfully drilled 21 of 32 exploratory wells and seven development wells, all in the gulf. Of the wells drilled in 2004, 24 were on the conventional shelf, 9 in deep water, 4 on the deep shelf, and 2 on land.

Total production for fourth quarter 2004 was 13.1 bcf of natural gas and 1.1 million bbl of oil. For the entire year, W&T produced a total of 53.3 bcf of gas and 4.8 million bbl of oil, compared with 52.8 bcf of gas and 4.4 million bbl of oil in 2003.

W&T has working interests in about 108 fields covering 927,000 acres in federal and state waters in the gulf, where it currently has five rigs operating.