Repsol and Alliance Oil Company have signed a Memorandum of Understanding to form a joint exploration and production (E&P) venture that will serve as a growth platform for both companies in the Russian Federation, the world’s largest oil and gas producer. (Russia was the largest producer of crude oil in 2009, surpassing Saudi Arabia.)
Alliance Oil will hold a 51% stake in the joint venture and contribute producing assets in Volga-Urals Region while Repsol will own the remaining 49% and make an initial cash investment to finance future growth opportunities.
The agreement seeks to combine Alliance Oil’s knowledge and privileged access to Russian exploration and production business opportunities with Repsol’s know-how and technical capabilities to create a long-term exploration and production alliance.
In addition to the exploitation of the assets to be contributed by Alliance Oil, the agreement includes seeking opportunities for exploration and growth through producing assets in the Russian Federation.
Repsol already owns a 3.47% stake in Alliance Oil resulting from the merger between Alliance Oil and West Siberian Resources in 2008. Repsol also owns a 74.9% stake in Eurotek-Yugra, which holds exploration and production licenses in the Karabashsky-1 and -2 blocks in the prolific West-Siberia basin.
The transaction is subject to negotiation of final contractual terms, due diligence of the assets to be contributed by Alliance Oil and the procurement of the relevant regulatory and corporate approvals, which is expected to be completed during 2011.
Spain-based Repsol is one of the world’s ten largest privately-owned integrated oil and gas companies, with activities in more than 30 countries; its oil and gas production is around a million barrels per day.
Alliance Oil Company Ltd is a leading independent oil company with vertically integrated operations in Russia and Kazakhstan. Alliance Oil has proved and probable oil reserves of 638 million barrels and downstream operations that include the Khabarovsk refinery and the network of gas stations and wholesale oil products terminals in the Russian Far East.