ALROSA reaches agreement with ROSNEFT to sell gas assets for $1.38 billion

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Fedor Andreev, President of OJSC ALROSA, and Igor Sechin, President and Chairman of the Management Board of Rosneft Oil Company, have signed an agreement for the sale of ALROSA’s gas assets. This covers the companies operating in the Yamalo-Nenets Autonomous District and the Republic of Sakha (Yakutia).

The official signing ceremony took place on 27 September in the presence of Dmitry Medvedev, Prime Minister of the Russian Federation, during the XII International Investment Forum in Sochi.

Total transaction value is estimated at $1.38 billion. Russian reserves classification estimates ALROSA’s gas assets have extractable reserves of 200 billion cubic meters of natural gas, and 40 million tons of liquid hydrocarbons.

ALROSA plans to use the transaction proceeds to repay the Group’s outstanding debt.

“The decision to sell the gas assets was made in pursuance of ALROSA Group’s strategy, which focuses on boosting diamond production capacities and gradual divestment of non-core assets. Rosneft Oil Company has enormous expertise in oil and gas field development, and already has practical experience working with Urengoy-based gas companies. We believe that the arrival of Rosneft, as a new shareholder, will further boost development of ALROSA’s oil and gas assets in the Yamalo-Nenets Autonomous District and Western Yakutia”, said Fedor Andreev, President of ALROSA.

Igor Sechin added that “Gas business development is one of Rosneft’s strategic priorities and acquisition of ALROSA’s oil and gas assets is perfectly in line with this strategy. It will also strengthen the positions of Rosneft in the Russian Far East – a region of great significance to the Company.”

The acquisition is subject to the relevant corporate and regulatory approvals process.

INFORMATION ON ALROSA GAS COMPANIES

1. Companies based in the Yamalo-Nenets Autonomous District

Originally acquired by the ALROSA Group in 2006, CJSC Geotransgaz and Urengoy Gas Company LLC hold exploration and development licenses to the Beregovoye and Ust-Yamsoveyskoye license areas, respectively.

CJSC Geotransgaz has been independently producing and selling gas since 2012, using Gazprom’s gas transmission network. Currently, the company is developing the Cenomanian and Valanginian deposits of the Beregovoe gas condensate field in the Yamalo-Nenets Autonomous District. Geotransgaz’s total production capacity reaches 2 billion cubic meters of gas and 300,000 tons of gas condensate per year.

2. Companies operating in Yakutia

ALROSA established its oil and gas companies in Yakutia in the early 1990s in order to lessen the dependence of local companies on oil products from outside of the Republic.

OJSC ALROSA-Gas is engaged in natural gas production and operates the existing trunk and distribution pipelines in the Mirny District of the Republic of Sakha (Yakutia). Gas from the Srednebotuobinskoye oil and gas condensate field is delivered to consumers in the Western Yakutia through the Taas-Yuryakh-Mirny-Aikhal single-line trunk pipeline, 530mm in diameter and 686km long.

Major natural gas consumers in Western Yakutia include diamond production companies, and power and heat generation companies in the town of Mirny. Currently, annual gas consumption of the Mirny District ranges from 230 to 245 million cubic meters. With a designed throughput capacity of 1 billion cubic meters per year, the pipeline can fully meet gas demand.

CJSC Irelyakhneft is an oil production company operating in a license area of the Irelyakh oil and gas condensate field. It also refines and sells crude oil and oil products.

This page was last updated on 27 September 2013 at 11.43