DUBAI, United Arab Emirates — Rosneft aims to expand its presence in the Middle East, including Iraq, after signing up to a groundbreaking gas project with a United Arab Emirates energy firm, Deputy Prime Minister Igor Sechin said Saturday. State-run Rosneft will join Crescent Petroleum in a gas concession in the emirate of Sharjah, Crescent said Saturday, for its first Middle Eastern foray. The pair will consider more joint ventures in the Middle East. "If there is a proposal in … Iraq, we will definitely study it," Sechin told reporters on Saturday.
"This project is a pilot, and we will have opportunities in Russia, the Middle East and the rest of the world. … There is no doubt it is a historic moment for Russian oilers starting their operations in the Middle East," said Sechin, the country's top energy official and chairman of Rosneft. Crescent's director of exploration and production, Abdulla al-Qadi, said Crescent was in talks with several companies about expanding in Iraq. Rosneft pumps more than one-fifth of Russia's oil and is the largest oil company in the world's top crude producer. It has big expansion plans but has so far refrained from aggressive purchases abroad because of what analysts describe as the company's concerns about potential legal suits it could face from former shareholders and managers of defunct oil firm Yukos. Crescent is a privately held energy firm based in Sharjah, in the north of the United Arab Emirates.
The deal is the first between the companies after they signed an agreement in mid-May to work on joint ventures in the Middle East and North Africa region. Rosneft will farm into Crescent's onshore gas concession in Sharjah, Crescent said in a statement. The companies would drill two wells in the 1,243-square-kilometer concession with an initial investment of 220 million dirhams ($60 million). Rosneft will receive a 49 percent stake in the concession, while Crescent will retain 51 percent, Crescent said. Initial investment will be split along the same lines, said Timur Rustamov, Rosneft's Middle East representative. Crescent has held the 25-year gas concession in Sharjah since February 2008. There is currently no production from the concession. "We are targeting gas reserves of approximately 2.4 trillion cubic feet [68 billion cubic meters] and gas condensate of approximately 117 million barrels," Crescent Petroleum executive director Badr Jafar said.
These are reserves that Crescent hopes to find in the concession, he said, but the firm will have a more accurate idea after the first two wells are drilled. The number of development wells that Rosneft and Crescent would drill would depend on results from the first two, Badr said. Gas produced would supply the United Arab Emirates' grid, while the condensates could be exported to international markets, Crescent said. Condensate is light oil produced as a byproduct of gas. The United Arab Emirates is the world's third-largest oil exporter. Most of its crude and gas production and reserves are in the capital emirate of Abu Dhabi, with much smaller reserves in the northern emirates.
The partnership aims to capitalize on Rosneft's technical expertise and financial strength and Crescent's international operating experience and knowledge of the Middle East and North Africa. Drilling began at the first of the two wells in Sharjah on Saturday. Rosneft and Crescent will work on the second well in about three months, Crescent's al-Qadi said. Qadi said previous drilling in Sharjah had shown oil finds, and so there is a possibility of finding oil with the new wells, but the priority was on gas. "We look forward to achieving many more opportunities … with Crescent Petroleum in the Middle East and North Africa region," Rosneft chief Sergei Bogdanchikov said in the statement. Rosneft is already working in upstream projects in Kazakhstan, Venezuela and Algeria.