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Russia’s Rosneft Looks To Attract Oil Traders To Huge Arctic Project

Russia’s top oil producer, state-controlled oil firm Rosneft, is in talks with some of the world’s largest oil trading houses, offering them to become investors in a major oil project in Russia’s Far North in exchange for oil supply contracts, sources close to the talks told Reuters.

Russia looks to develop the Vostok Oil mega project in Siberia, which includes the Vankor and Payakha clusters and which has resources estimated at 44 billion barrels. The Vostok Oil project in Russia’s Far North includes the Vankor cluster, the Zapadno-Irkinsky block, the Payakhskaya group of fields, and the East Taimyr cluster. All those clusters are close to the Northern Sea Route that Rosneft wants to use to ship oil to Europe and Asia.

Commodity trader Trafigura said in December it had bought 10 percent in Vostok Oil, which would give Trafigura access to high-quality crude oil resources from a major new onshore oil-producing region in Siberia’s Taymyr province. The deal also provides Trafigura with access to long-term offtake supply of crude oil, including from Vostok Oil.

Now, according to Reuters’ sources, Rosneft is in talks with other major oil traders—including Vitol, Gunvor, and Glencore—to potentially attract them to invest in the Vostok Oil project by also offering future oil supply. Rosneft is offering the traders stakes in Vostok Oil in exchange for immediate contracts to supply crude and oil products, Reuters’ sources say.

Rosneft was previously looking to get financing for the project from investors in Japan, India, and China, but after the oil price collapse in early 2020, talks had stalled, sources familiar with the issue told Reuters.

Still, some of the traders may not be inclined to buy a stake in the multi-billion project because of Western sanctions on Russian shale and Arctic oil developments and the pullback by many banks from funding development in the Arctic, trading sources told Reuters.

Rosneft aims to deliver Vostok oil to the Northern Sea Route by 2024, chief executive Igor Sechin told Russian President Vladimir Putin in November at a meeting to discuss the project.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on January 16 2021 said:
    The Arctic is Russia’s newest oil and gas province. It has been targeted by US sanctions since 2014 to no avail. President Putin has long ago recognized the great importance of the Arctic for the Russian economy and the Russian oil industry. That is why he has been pouring hundreds of billions of dollars into the region.

    And despite the sanctions, the Arctic’s huge oil and gas potential has been attracting investments to the Vostok oil mega project in Siberia with estimated reserves of 44 billion barrels of oil. Russia’s oil giant Rosneft is now trying to attract some of the world’s largest oil traders to invest in the Vostok project in exchange for oil supply contracts. The great advantage of the Vostok project is its closeness to the Northern Sea Route (NSR) that Rosneft wants to use to ship oil to Europe and Asia.

    Commodity trader Trafigura has already bought 10% in Vostok. Rosneft is also in talks with other major oil traders including Vitol, Gunvor, and Glencore to attract them to invest as well.

    With more than 48 billion barrels of oil and 43 trillion cubic metres of gas in its share of the Arctic, Russia is going at full blast developing its oil and gas reserves using home-grown state-of-the-art technology that will ensure its energy supremacy well into the future.

    President Putin expects a dramatic expansion in the extraction of these Arctic resources in the next 10-15 years and a corollary build-out of the NSR as the primary transport route of oil and gas to the world’s largest energy market, China.

    The Vostok project is expected to create a “new oil and gas province” on Siberia's Taymyr peninsula, with the completed project representing a total investment of $111 billion, including two airports and 15 “industry towns. Rosneft’s Arctic developments would eventually have 2 million barrels a day (mbd) exported from the Arctic along the NSR by 2024.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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