OREANDA-NEWS. April 18, 2011. Sistema (LSE: SSA), the largest diversified public financial corporation in Russia and the CIS, announces that Bashneft, a subsidiary of Sistema, and LUKOIL have signed an agreement to create a joint venture and establish the terms and conditions for the development of the Trebs and Titov oil fields, reported the press-centre of Sistema.

According to the agreement, LUKOIL will pay RUB 4.768 billion for a 25.1% equity stake in a Bashneft subsidiary to which will be transferred the license for the use of subsoil fields, including the R. Trebs and A. Titov fields (the “Fields”), for geologic evaluation, exploration, and extraction of hydrocarbon reserves. The joint venture will in turn acquire 29 exploration wells located on the Fields from the LUKOIL Group of companies. The agreement also provides LUKOIL with minority protection for certain key issues, as is usual practice for oil consortiums.
 
The parties have agreed to transport the crude oil from the Fields through a pipeline to Lukoil’s Varandey Oil Loading Terminal on the Barents Sea coast where it will be transferred onto tankers. The parties are considering the possibility of supplying the extracted natural gas to an energy centre of the South Khylchuyu oil field, which is being developed by Naryanmarneftegaz, a joint venture 70% owned by LUKOIL and 30% owned by ConocoPhillips. The resulting electricity production would be supplied to the oil production units at the Fields.

The parties intend to finance the joint venture’s future operations in proportion to their respective equity ownership in the joint venture.
 
The closing of this transaction is contingent upon satisfaction of a number of conditions, including receipt of all necessary corporate and governmental approvals and negotiation and execution of various agreements relating to the operation of the joint venture.
 
Note to editors:
 In February 2011, Bashneft was granted a 25-year licence for subsoil deposits, which include oil fields named after Roman Trebs and Anatoly Titov, located on a 2,151 square kilometres plot in the Nenets autonomous district of Russia. Total recoverable oil reserves (C1+C2) of both fields amount to 140.1 million tonnes.