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Rumors of a $10Bn Deal for PetroChina in Russia

PetroChina is eyeing a $10 billion natural gas investment in plays run by Gazprom and Rosneft in Russia’s Eastern Siberia in a deal that would represent the Chinese giant’s biggest-ever acquisition abroad, according to reports citing unnamed sources.

PetroChina would spend a minimum of $10 billion to acquire a minority share in these fields operated by Russian state-run gas giant Gazprom (GAZ) and state-run Rosneft (ROSN), according to Bloomberg, which cited four unnamed people close to the talks.  

PetroChina, the publicly traded unit of state-owned China National Petroleum Corp., has not confirmed the deal, but told Bloomberg: “PetroChina is willing to promote all-round cooperation with Russia’s oil companies, and hopes to invest in Russia’s upstream oil and gas exploration and development businesses.”

Related Article: Petro-Banking

For China, this potential deal would mean almost 70 billion cubic meters of Russian gas a year. It would also be the culmination of years of talks that began back in 2004 and have until now yielded no results due to disagreements over prices.

But sources close to Gazprom, and indeed a spokesman for Gazprom itself, deny any deal with PetroChina, while Rosneft is refraining from commenting at all, according to Bloomberg. “Such a proposal isn’t even discussed,” Bloomberg quoted Gazprom spokesman Sergei Kupriyanov as saying.

Still, Gazprom did say it planned to sign a contract for Russian gas supply to China by the end of this year, but there is nothing on the record about a PetroChina acquisition in Eastern Siberia.

Earlier this year, CNPC agreed this year to buy a 20% stake in the $20-billion Yamal LNG development in the Russian Arctic, controlled by OAO Novatek, which is Russia’s second-largest natural-gas producer. Then, in June, Rosneft signed a $270 billion agreement to supply gas to CNPC.

Related Article: The Subsea Factory

Under question here are natural gas assets that are conveniently located next to a new pipeline Gazprom is planning that would run from Siberia through the Far East to supply China as well as a planned liquefied natural gas (LNG) plant that would supply Japan and Korea by late 2017 or early 2018.

The PetroChina acquisition—if indeed it proves to be true—could involve the Gazprom-operated Chayanda field and its 1.2 trillion cubic meters of gas, or the Kovykta gas field and its 1.5 trillion cubic meters of gas, estimated.

By. Charles Kennedy of Oilprice.com

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