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Shell teams up with Rosneft

Russia's state-controlled oil company Rosneft and Anglo-Dutch Shell have signed an agreement on strategic cooperation that stipulates joint exploration, oil production and processing, and the sale of petrochemicals in Russia and abroad.

Rosneft hopes to get a share of Shell's European refineries. However, analysts believe that their immediate cooperation will be limited to Shell financing exploration in an attempt to gain access to Russian projects.

That could make up for its losses from Gazprom's accession to the Sakhalin II oil and gas project, off Russia's Pacific Coast.

Industry experts said Shell would begin by replenishing its reserves. After it sold a 25% stake in Sakhalin II to the Russian gas monopoly, its proven reserves cited in its financial reports on the project went down from 109 million metric tons of oil equivalent to 55 million metric tons.

Rosneft needs financial support and access to European refineries.

Valery Nesterov, an analyst with Troika Dialog, said that Rosneft, whose ambition is to become a global company, has been working with British Petroleum, France's Total, and Chinese and Korean companies.

According to Maxim Shein, an analyst with Broker Credit Service, Russian companies need to buy European assets that refine Russian oil, because they may eventually have to compete with Kazakh oil.

Russia's largest private oil company LUKoil "has been working for several years to expand its facilities in Europe, all in vain, despite the support of ConocoPhillips," Nesterov said.

He believes that Rosneft may use the 9.44% stake it bought from the bankrupt oil company Yukos for the acquisition of refining assets in Europe.

Experts agree that Shell and Rosneft will initially focus on Russian projects. Last year Rosneft spent $916 million on licenses.
Konstantin Batunin, an analyst with Alfa Bank, said it "should invest substantially in order to use the projects' capabilities."

He believes that Rosneft will use a tried and tested scheme in its cooperation with Shell, under which the foreign partner finances exploration while the Russian company pledges to repay the expenses after the project comes on stream.

© Vedomosti, a Russian newspaper

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