China's Beijing Gas Group Company has reportedly acquired a 20-percent stake in a subsidiary of Russian Rosneft, giving the Russians help in developing resources in eastern Siberia and access to China's lucrative gas market.
The price tag on Beijing Gas' acquisition of a 20-percent stake in Verkhnechonskneftegaz-a Rosneft subsidiary-was said to be US$1.1 billion, according to news agencies.
"The agreements reached with Beijing Gas … is a new milestone of the energy dialog between Russia and China. I am confident that this deal will give a new impetus to the relations between the two countries in the area of energy cooperation, while the competences and capabilities of our partner on the key distribution market will generate significant synergies from our joint operation," Rosneft CEO Igor Sechin said in a statement.
Rosneft is 70-percent owned by the Russian government, while the biggest minority shareholder is BP, with 19.75 percent.
While Beijing Gas has acquired a 20-percent stake in a Rosneft subsidiary, a bigger deal between Rosneft and the Chinese has been a hot topic of discussion for months. Russia has been considering the sale of a 19.5-percent stake in the parent company, which is the largest listed producer of crude oil in the world, valuing that stake at somewhere near US$10 billion.
The subsidiary deal with Beijing Gas is just a precursor to the bigger deal, which may now materialize soon.
On Monday, 7 November, Russia published a government decree that orders the sale of the 19.5-percent stake in Rosneft, held by state energy firm Rosneftegaz, The decree calls for the sale to be finalized by 5 December 2016, Reuters reported.
The sale comes as Moscow struggles with a budget deficit that risks further inflating, while estimates suggest that the country needs to raise nearly US$16 billion through privatization sales before year's end.
By Charles Kennedy of Oilprice.com
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