Translated material
Against the tide
Marathon Oil sold Russian oil and gas assets
The American company Marathon Oil, which operates around the world, has decided to part with its Russian assets. Yesterday it announced that it was selling all nine fields it owned in the Khanty-Mansi Autonomous Okrug to LUKOIL. By coincidence, Marathon Oil decided to leave the Russian oil industry, which is attracting close interest from the world’s largest oil companies, after it was inspected by Rosprirodnadzor and Rostechnadzor. However, the president of the American company, Clarence Cazalot, assures that he has no plans to completely curtail business in our country. “We have decided to monetize these specific assets while continuing to explore other attractive opportunities in Russia,” he says.Marathon Oil has been operating in Russia since the 1990s and was one of the participants in the Sakhalin-2 project, but then left it. In 2003, the company acquired for $275 million the Khanty-Mansiysk Oil Corporation, registered in Houston, which controls Khantymansiyskneftegazgeologiya (license for the Vostochno-Kamenny and Potanai-Kartopinsky areas), Nazymgeodobycha (Galyanovskoye, Sredne -Nazymskoye, Aprilskoye, Olkhovskoye, Bolshoye and Central fields on the right bank of the Ob) and “Paytykh Oil” (Paytykhskoye - left bank of the Ob).
As reported in an official statement by LUKOIL, it is now acquiring 95% of Khantymansiyskneftegazgeologiya and 100% of other enterprises. The transaction amount should be $787 million. It is planned that it will be completed in mid-July, when the necessary approvals from regulatory authorities are received. Proven and probable reserves of nine fields, according to LUKOIL, amount to 250 million barrels of oil (about 34 million tons). The total production of companies in 2005 was more than 1.3 million tons (an increase of 68% compared to 2004).
However, Marathon Oil is not very good at working in Russia. A few years ago, she intended to create a joint venture with the then small company Rosneft, which would combine the assets of the Americans and the state-owned Severnaya Neft, but the deal never took place. And last fall, Marathon Oil was inspected by Rosprirodnadzor. As a source in the Ministry of Natural Resources told Vremya Novostey, as a result, some violations were identified, in particular regarding the drilling volumes provided for in the license agreement. The results of the inspection were sent to Rosnedra, but no sanctions were applied to the company. But already this year, an inspection of Marathon Oil enterprises was carried out by Rostekhnadzor, which also had a number of complaints, which the service reported to the head of Rosnedra, Anatoly Ledovskikh. This happened back in February. True, yesterday a source in the Ministry of Natural Resources assured that Mr. Ledovskikh has now ordered a re-inspection of companies owned by Americans.
LUKOIL did not want to comment on anonymous statements about inspections.
Experts believe that the Russian holding made a successful purchase. “Oil reserves abroad are now very expensive,” says Troika Dialog analyst Valery Nesterov. — For example, in Kazakhstan, a barrel of reserves was recently sold for $8-$11, and when ConocoPhillips bought Burlington Resources, it paid a record price — $18 per barrel. LUKOIL received Marathon Oil reserves at $3.2 per barrel, while when the Russian company bought a stake in the SeverTEK joint venture from its Finnish partners, it paid approximately $5 per barrel of reserves.” The expert adds that subsidiaries of the Russian holding are already producing near the Marathon Oil license areas. LUKOIL's materials also indicate that the price of assets is 60-70% lower than the cost of similar acquisitions made recently on the Russian market. LUKOIL estimates the synergistic effect from the deal to be approximately $100 million.
At the same time, Marathon Oil's decision to exit the Russian business surprises experts. “This goes against the general trend. Russia is a very promising region in which all companies want to work - both the American ExxonMobil and the European MOL or OMV,” notes Mr. Nesterov.
At the same time, Marathon Oil has many projects around the world in which the funds can be invested, perhaps with greater returns. Company spokesman Paul Wieditz calls the decision to exit the Russian business “independent” of recent inspections by government agencies. “The sale fits into the processes we carry out around the world. We want to monetize some of our assets, and this also applied to assets in Khanty-Mansi Autonomous Okrug,” he says.