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Rosneft may soon withdraw from its only project in Algeria, an exploration project which Russia’s oil giant considers to have doubtful prospects, Russian business daily Kommersant reported on Monday, quoting several sources.
A joint venture between Rosneft and Russian oilfield engineering company Stroytransgaz holds 60 percent in the 245-S block in southern Algeria, which contains the West- and East-Takuazet oil fields and North-Tesselit gas condensate field. The remaining 40 percent in the 245-S prospect block is held by Algeria’s state-run company Sonatrach.
Rosneft’s latest press release on the Algerian project dates back to 2012, the year in which Igor Sechin became Rosneft CEO and decided to focus on other ventures, one of Kommersant’s sources said.
When oil prices started slumping in 2014, Rosneft became even more disappointed with the development of the Algerian deposit, another source told Kommersant. Rosneft has even tried to offer its stake in the Algerian project to Russia’s Gazprom, but the gas major declined.
Rosneft has not officially disclosed how much it has invested in Algeria to date, but Kommersant sources say the Russian company’s exit from Algeria could equate to a several-hundred-million-US-dollar write off in the form of a penalty owed to Algeria.
To minimize its losses and avoid the penalties, Rosneft may try to sell its stake to Sonatrach. Rosneft must also discuss and coordinate with the Russian Federation its withdrawal from Algeria, Kommersant says.
Most of the exploration projects of Russian oil companies outside Russia have been unprofitable, because the projects have often been initiated for political reasons, analyst Vitaly Kryukov at Small Letters told Kommersant.
Algeria may not be of particular importance to Rosneft, but the Russian oil giant is expected to ramp up its global expansion under incoming U.S. President Donald Trump.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.