Repsol and Gazprom Agree Russian JV

06.07.2017 -

Spanish energy and petrochemicals group Repsol has agreed to establish a joint venture with Russian oil company Gazprom Neft, a subsidiary of energy giant Gazprom, despite Western sanctions targeting the Russian energy sector.

A final decision on whether to go ahead will be made at the end of 2019, after geological prospecting is completed.

Financial terms of the deal have not disclosed. The agreement foresees Gazprom taking a 25.02% stake in Repsol’s Evrotek-Yugra project in western Siberia, with the two companies jointly developing its seven oil exploration blocks Also included is the option for the Russian partner to increase its stake to 50%.

Around nine exploratory wells have already been drilled within the seven license blocks of the Evrotek-Yugra project. The Ouryinskoye field, which lies inside the blocks, is believed have recoverable reserves of 33.8 million t of oil.

Repsol, which has been operating in Russia since 2010, holds licenses for 17 production and development blocks and 16 exploratory block, according to reports. 

“Alongside strategically expanding our resource base, we also have the opportunity to share our geological prospecting skills and know-how with one of the largest oil companies in Europe,” said Gazprom Neft’s CEO, Alexander Dyuko, commenting on the deal.  “Our combined geological exploration expertise will ensure the planned works will be executed with the maximum efficiency,” he said.

That European energy companies can participate in joint projects in Russia despite the sanctions is due to a “grandfathering” clause in the EU sanctions, meaning that investments predating the sanctions imposed in 2014 remain legal. A number of EU-based companies including Total of France and Eni of Italy continue to partner with Russian companies on drilling and exploration projects, as only certain areas of technology are banned, such as drilling in the Arctic and exploitation of shale gas deposits.

ExxonMobil, of which new US Secretary of State Rex Tillerson was CEO, ran afoul of the stricter US sanctions, which were further toughened by the Senate last month. The move was designed to punish Moscow for interfering in the November 2016 US election.

The US energy group had been planning to exploit shale gas reserves in Russia's Arctic, Black Sea and Siberian regions. Eni reportedly is taking its place in some of the projects.