VEDOMOSTI, April 06, 2006

No.60 (1587)

Zarubezneft is coming to Brazil

By Alexander Becker

BRASILIA – Zarubezhneft may replenish the list of its oil assets by Brazilian ones. In the near future the company will sign a cooperation agreement with Brazilian oil company Oil M&S Brasiliasa. This is what was revealed to “Vedomosti” by the Head of Zarubezhneft, Nikolay Tokarev.

Brazil has started to be much sought after by Russian oil companies. Following Gazprom that held discussions in February with Petrobras, local oil and gas monopolist, concerning the prospects of participation in constructing gas pipeline Venezuela – Brazil – Argentine, Zarubezhneft is negotiating partnership with Brazilian companies. Zarubezhneft’s top manager, Nikolay Tokarev informed “Vedomosti” that Zarubezhneft intends before long to sign a cooperation agreement with private Brazilian company Oil M&S Brasiliasa that won 40 licenses Tender last year for oil fields development in Brazil. If the reserves for those Blocks are confirmed, Oil M&S Brasiliasa may become the second company after Petrobras by oil reservs.

According to the Head of Zarubezhneft, Brazilians are interested in attracting Russian technologies of reservoirs oil recovery enhancement, and Petrobras has unique experience in working on deep water shelf. “Whereas our Joint Ventures in Vietnam are working on offshore sectors at 100m depth, then here oil pools can be found at the depth of up to 1km” - says the Head of Zarubezhneft, adding that the projects in Brazil are much more capital-intensive: The cost of drilling of one well in Vietnam amounts to $ 15-20m, and in Brazil it is 1.5-2 times more expensive. But this could be compensated by liberal Tax Legislation for foreign investors.

For more than a year Zarubezhneft has been closely working with Brazil’s National Petroleum Agency, - adds an official from “White House” (Russia’s Council of Ministers Headquarters, as it is unofficially called by Russians) who participated in Prime Minister Mikhail Fradkov’s visit to this country. According to the official, not only Zarubezhneft, but also Lukoil hold talks in regards to exploration and production of oil on Brazilian deep-water offshore oilfields.

According to Valery Nesterov’s opinion, the analyst from Troyka Dialog company, it is important for Zarubezhneft to gain footing on Brazilian oil market. Valery Nesterov is pointing out that the petroleum industry of that country has been developing successfully: oil production increased from 34m tons in 1994 to 77m tons in 2005. However, the presence of Zarubezhneft in South America in the first place has the traces of creating image. “This Company is the perpetrator of the Russian policy on the worldwide market”- says Valery Nesterov.

Besides, according to the official, Zarubezneft has been discussing for a year the issues of oil and gas cooperation with Petrobras in regards to the construction of Venezuela – Brazil – Argentine transcontinental gas pipeline with the extension of 8,000km and at the cost of $17-20bn. According to his version Stroitransgaz and Gazprom express serious interest for this project. “We are ready to consult Petrobras and participate in developing the feasibility study for the transcontinental gas pipeline, but the time has not come yet to speak of our joining the consortium, since this would require serious investments”,- specifies Gazprom’s manager. According to him everything will depend on terms and conditions of entering the consortium.