Activity in the Oil and Gas sector (including regulatory)

UPDATE 1-AAR may sell TNK-BP stake to Rosneft or govt-paper

Fri Feb 4, 2011 11:18am IST

* Rosneft looking into buying out AAR, one source says

* One option is share swap for Rosneft stock

* Rosneft, BP decline comment; AAR denies stake sale plan

(Adds details, background)

MOSCOW, Feb 4 (Reuters) - AAR, the consortium of Russian shareholders of TNK-BP may sell its stake in the oil firm to Rosneft or the Russian government, Vedomosti business daily reported on Friday, citing four sources.

State-controlled Rosneft last month struck a share swap and Arctic exploration deal with British major BP , which owns half of TNK-BP.

AAR is fighting to stop the proposed joint venture which it says violates their shareholder agreement with BP, and this week secured a court injunction in London to freeze the negotiations.

Some investors have been puzzled as to what AAR hopes to achieve by opposing the deal, which is backed by Russia's powerful Prime Minister Vladimir Putin. A sale of its TNK-BP stake to Rosneft could offer a way out of the conflict.

Rosneft declined to comment when contacted by Reuters. BP declined to comment when contacted by Vedomosti, while AAR denied the sources' information.

Two of the sources told Vedomosti that there were discussions about swapping shares in TNK-BP -- the other half of which is owned by BP -- for Rosneft shares, either fully or with a cash element.

Another source, close to Rosneft President Eduard Khudainatov, said Rosneft was looking into buying out AAR.

"The management of the company was told to prepare for the purchase of the stake of Russian TNK-BP shareholders," the source said.

According to Reuters data, TNK-BP closed on Thursday with a market capitalisation of $45 billion. (Reporting by Alexander Ershov; Writing by Toni Vorobyova; Editing by Lincoln Feast)
Rosneft may receive license for Timan Pechora's 366 mln bbl Naulskoye field

http://www.bne.eu/dispatch_text14149

UralSib
February 4, 2011

Starting price implies $0.33/bbl of resources. Rosneft (ROSN RX - Under Review) has applied for an exploration and production license for the Naulskoye field in the north of the Nenets region's Timan Pechora, where Bashneft's Titov-Trebs and LUKOIL's Yuzhno-Khylchuyu fields are located. The Naulskoye field's C1+C2 reserves and resources are esti- mated at more than 366 mln bbl (50 mln tons) of oil, and the field is only 33 km from a pipeline. The starting price for the license is $120 mln (RUB3.6 bln), translating into $0.33/bbl of C1+C2 reserves and re- sources.

We expect Rosneft to prevail over LUKOIL and Zarubezhneft. As- suming that further drilling (16 wells have been drilled thus far) results in C1+C2 resources being converted into proven reserves, Naulskoye would be similar in size to LUKOIL's Yuzhno-Khylchuyuskoye, with its 500 mln bbl of proven reserves. We would then expect it to be able to produce 40,000-60,000 bpd at its plateau, compared with 150,000 bpd for Yuzhno-Khylchuyuskoye. Given the size and location, this asset should also be attractive to LUKOIL and Zarubezhneft, which are both active in the north of Timan-Pechora. Both are expected to file applications for the field following Rosneft (which we expect to win).

Test of Rosneft's ability to add more accessible, onshore reserves. Rosneft could add 2-3% to its output after the launch of Naulskoye, possibly as soon as 2014. The starting price is attractive, and the field does not seem to require infrastructure invest- ment of the same scope as Yuzhno-Khylchuyu or Titov-Trebs. However, more important than the impact on Rosneft's output forecast would be the fact that it could still add relatively accessible onshore reserves that are inexpensive to develop. We expect Rosneft to pass this test. The stock is currently Under Review.

Alexei Kokin

http://www.bne.eu/dispatch_text14149

Troika Dialog

Igor Sechin, the deputy prime minister in charge of energy, has ordered the government to draw up measures supporting Bashneft and Tatneft, likely through further Mineral Extraction Tax (MET) breaks on their depleted fields, until Bashneft launches the Trebs and Titov fields and Tatneft completes all the stages of its Taneco petrochemicals refinery, Petroleum Argus reports this morning.

Both companies already enjoy a lower MET on their depleted fields, which, we estimate, contribute the bulk of both companies' output.

While Bashneft would be a net loser, on our estimates, from the Energy Ministry's proposal to equalize the export duties on light and heavy products at 66% of the duty on crude oil, Tatneft would be a huge beneficiary of the second part of that proposal - to reduce the top rate of the crude oil export duty. For Bashneft specifically, the measure intends to soften the impact of export duty equalization and hence is clearly positive for the company.

We would prefer a more systematic approach to sector taxation, as the preferential treatment of individual companies creates uncertainty and rent-seeking, which is bound to mire the government in similar discussions for years to come. However, under the current method, we would expect that Alliance Oil Company will be the next knocking on Mr Sechin's door, as the company stands to lose from the export duties rebalancing in the short term, though the impact on its financials would be neutral after 2012.

Oleg Maximov