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Abu Dhabi, UAETuesday 13 November 2018

Mubadala and Russia's sovereign wealth fund seal oil deal

The partners will now operate and develop concessions in the Western Siberian region

Mubadala Petroleum chief executive Bakheet Al Katheeri, left, with Gazprom Neft first deputy chief executive Vadim Yakovle and RDIF first deputy chief executive Anatoly Braverman, right. Mubadala Petroleum
Mubadala Petroleum chief executive Bakheet Al Katheeri, left, with Gazprom Neft first deputy chief executive Vadim Yakovle and RDIF first deputy chief executive Anatoly Braverman, right. Mubadala Petroleum

Mubadala Petroleum and the Russian sovereign wealth fund have finalised a deal to acquire a 49 per cent shareholding in an oil venture from Gazprom Neft, marking the Abu Dhabi company's entry into Russia.

Mubadala Petroleum, a unit of Abu Dhabi strategic firm Mubadala Investment Company, didn't disclose the value of the deal in a statement on Wednesday. Mubadala Petroleum and the Russian fund have 44 per cent holding and five per cent equity in the venture respectively.

"The acquisition of a 44 per cent interest in the Gazpromneft-Vostok joint venture is another important step in Mubadala Petroleum’s drive for sustainable and profitable growth, marking our entry into Russia and adding valuable oil production to our existing portfolio," said Mubadala Petroleum chief executive Bakheet Al Katheeri.

Russia, the world's biggest energy exporter, was hard hit by the slump in oil prices as well as EU sanctions, but the recovery in crude prices has revived foreign investor interest.

Following the completion of the Mubadala Petroleum-Russian Direct Investment Fund transaction, Gazprom Neft will have a 51 per cent interest in the joint venture. Gazpromneft-Vostok, the joint venture, will remain the Russian company's subsidiary. It operates 13 fields largely in the Tomsk and Omsk regions of Western Siberia.

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The partners will jointly work to bring new technologies for "profitable development of pre-Jurassic hydrocarbon resources in the Tomsk region," Gazprom Neft chief executive Alexander Dyukov said in the statement.

The partners will work to determine the venture's long-term strategy, focusing on generating efficiency in exploration and production.

Proven and probable oil reserves in the fields under the management of the venture amount to approximately 300 million barrels. Oil production from the fields last year was about 33,000 barrels per day (bpd). The output from the fields is sold into Russia’s domestic as well as the international markets and transported primarily through the Eastern Siberia-Pacific Ocean oil pipeline.

Mubadala Petroleum manages assets and operations currently spanning eight countries with a geographic focus on the Middle East and Southeast Asia. The Abu Dhabi company's average working interest production in 2017 was around 320,000 bpd of oil equivalent. Mubadala Petroleum's assets in the Gulf include the Dolphin Gas project, which delivers pipeline gas to the UAE from Qatar as well as enhanced oil recovery operations in Oman. The company has also made forays into the booming Egyptian energy sector, acquiring a ten per cent stake in the giant offshore Zohr gas field from Italy's Eni in June.

Mubadala Petroleum also operates concessions in South East Asia. Its diversification into Russia comes amid an increased focus on attracting capital investment into the country's energy sector. Last year, state oil producer Rosneft announced plans for around $8 billion worth of investment in the Russian offshore energy industry over the next five years.

Gazprom Neft is the oil arm of Russian gas exporter Gazprom. The company is present in the Middle East through investment in the Badra oil field in Iraq. Gazprom Neft announced in December plans for further $2.5bn investment in the project until 2030. Production from the southern Iraqi oil field stood at 85,000 bpd at the end of last year.