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A joint venture to develop assets contributed by the shareholders to enhance production, and serve as a vehicle to facilitate reserve growth through acquisition opportunities in oil and gas exploration and production in Russia was formed by Alliance Oil Co. Ltd. and Repsol Exploración SA.
Under the agreement, Alliance and Repsol will establish a joint venture with a total asset base of approximately $840 million, following asset and cash contributions by the shareholders. Alliance will hold a 51% interest and Repsol the remaining 49%.
Repsol chairman Antonio Brufau and Alliance Group chairman Musa Bazhaev have signed the agreement in Moscow on Dec. 20. This agreement seeks to combine Alliance’s knowledge and access to exploration and production business opportunities in Russia with Repsol’s know-how and technological and financing capabilities to create a long-term exploration and production partnership in Russia.
Under this collaboration, Alliance will transfer its upstream subsidiaries Saneco and Tatnefteodatcha, which comprise exploration and production licenses at 14 fields with proven and probable oil reserves of 171.5 million barrels as of Dec. 31, 2010, and current production of around 20,500 barrels of oil per day. Alliance’s asset contribution is valued at $570 million. Repsol will carry out a capital increase in the joint venture and also pay cash to Alliance to obtain a 49% participation.
In addition to the exploitation of the assets contributed by Alliance, the agreement envisages the pursuance of growth opportunities through the joint acquisition of oil and gas assets in Russia. The joint venture will have preferential rights regarding new upstream business opportunities identified by either Alliance or Repsol in Russia.
The formation of the joint venture is pending regulatory approval. Alliance has been advised by Bank of America Merrill Lynch and Baker & McKenzie and Repsol by Barclays Capital and DLA Piper.
Repsol already owns a 3.5% stake in Alliance as a result of the merger between Alliance and West Siberian Resources, in which Repsol initially held 10%, in 2008. Repsol also owns a 74.9% stake in Eurotek-Yugra, which owns two exploration and production licenses, known as Karabashsky-1 and -2, and five licenses for geological study in the prolific West-Siberan Basin.
Alliance Oil is an independent oil company with vertically integrated operations in Russia and Kazakhstan.