Russia’s Rosneft has completed the sale of 20% stake in its subsidiary Verkhnechonskneftegaz to Beijing Gas Group Company (Beijing Gas) for $1.1bn.
The acquisition allows the Chinese company to own a stake in one of the largest producing fields in Eastern Siberia with developed infrastructure and access to the ESPO pipeline.
It will also enable Rosneft to enter China’s prospective domestic gas market, including end users via swap gas supplies.
Verkhnechonskneftegaz owns a license to develop the Verkhnechonskoye oil and gas condensate field.
The field is estimated to have current recoverable reserve of 173 million tons of oil and gas condensate and 115 billion cubic meters of gas. Currently, it produces 8.5 million tons of oil per year.
With the stake sale in the project, Rosneft is expected to fully implement the significant potential of the Verkhnechonskoye field, including natural gas production.
The transaction will also strengthen its strategic partnership with one of the largest natural gas sales companies in China.
Beijing Gas is a major company in the area of natural gas supply, gas infrastructure construction and power generation in the Beijing region.
Rosneft said that the deal will offer broad prospects for its gas business in the Chinese market, driven by the PRC authorities’ decision to transfer Beijing's electric power from coal to gas.
Rosneft Chief Executive Officer Igor Sechin said: “The Implementation of the project of Beijing Gas corporation joining the Verkhnechonneftegaz enterprise will allow us to enter the rapidly growing Chinese market.
“The eastern direction is one of the most prospective and strategically important for us. Cooperation with Beijing Gas is a good example of Rosneft's integral approach, which contributes to the creation of a reliable energy bridge between Russia and Asia Pacific countries.”
The two companies signed an agreement for the Verkhnechonskneftegaz deal in November 2016.
Image: Rosneft and Beijing Gas sign binding documents for the sale of 20% stake in Verkhnechonskneftegaz in November 2016. Photo courtesy of Rosneft.