30 September 2004
Conoco gets share of Russian oil company
ConocoPhillips will pay almost $2 billion for a 7.6% stake in one of Russia's top oil producers, LUKOIL. Eventually, the third-largest U.S. oil company said it would seek up to 20% of the Russian oil firm.
The oil companies said the deal has the support of the U.S. and Russian governments. Conoco purchased the Russian government's remaining 7.6% stake for $1.988 billion.
The two companies also said Conoco would not go beyond a 20% ownership in LUKOIL for at least four years.
The alliance opens the door for the two companies to tap into vast reserves in northern Russia and Iraq. All major oil companies are keeping their eyes peeled for Russia. Last year, BP spent more than $7 billion to establish a joint oil venture, TNK-BP.
Under the deal, Conoco also said it wanted to purchase a further 2.4% in LUKOIL. The two firms said they would form a joint venture—70% owned by LUKOIL and 30% by Conoco—to develop Russia’s northern Timan-Pechora oil region.
Conoco will pay $370 million for its stake in the venture and contribute 30% of working capital and 30% of capital investments effective 1 January 2005.
The joint venture, to be governed 50-50 by the two companies, expects to produce 200,000 barrels of oil per day by 2008, and production will be piped to LUKOIL’s Varandey Bay terminal on the Barents Sea and then shipped to international markets.
The firms will also team in Iraq to win the right to develop the West Qurna oil field, with Conoco aiming eventually to gain a 17.5% interest in a production sharing deal.
LUKOIL is the world's second-largest oil firm by reserves behind ExxonMobil, oil industry experts said.
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