Mubadala Petroleum forays into Russian upstream market with joint venture deal

The UAE-based firm and its Russian partner RDIF formed a JV with Gazprom Neft-Vostok to develop several oil fields in Russia

The Shinginskoe field, operated by Gazprom Neft-Vostok. The deal is Mubadala Petroleum’s first investment in the Russian oil and gas sector. Courtesy Gazprom Neft-Vostok

Mubadala Petroleum, an Abu Dhabi-owned energy firm, and the Russian Direct Investment Fund have formed a joint venture with Russia’s Gazprom Neft-Vostok to develop several oil fields in the country.

Mubadala Petroleum, a subsidiary of Abu Dhabi strategic firm Mubadala Investment Company, and RDIF, the sovereign wealth fund of Russia, will acquire a 49 per cent equity stake in Gazprom Neft-Vostok, the operator of the oil fields in Western Siberia, the companies said in a joint statement on Thursday.

The deal is Mubadala Petroleum’s first investment in the Russian oil and gas sector. Proven and probable oil reserves in the fields amount to approximately 300 million barrels. Oil production from the fields last year was about 33,000 barrels per day (bpd). The output from the fields is sold into Russia’s domestic as well as the international markets, and transported primarily through the Eastern Siberia-Pacific Ocean oil pipeline.

"This investment marks a further step in our long-term growth strategy and sees Mubadala Petroleum’s entry into Russia,” said Bakheet Al Katheeri, the chief executive of Mubadala Petroleum. “Through this new partnership with RDIF and Gazprom Neft … we will not only share but also further build on our expertise and capabilities in oil and gas while adding significant oil production to our existing oil and gas portfolio. "

Kirill Dmitriev, the CEO of RDIF, said the fund, its Abu Dhabi partner and Gazprom Neft-Vostok see this project as the “first step in creating a consortium to pursue further significant investments in the sector”.

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Both RDIF and Mubadala Petroleum on Thursday did not specify the split of 49 per cent stake between the partners or the monetary value of the deal, which is subject to regulatory and internal approvals.

Reuters earlier reported that RDIF will take a 5 per cent shareholding while Mubadala Petroleum is buying a 44 per cent stake in Gazprom Neft-Vostok, a subsidiary of the Russian gas major Gazprom, which is worth at least $271 million. Gazprom board has already agreed to sell the stake in its unit to Abu Dhabi-based company, the new agency cited a Gazprom statement as saying.

Mubadala Petroleum manages assets and operations currently spanning eight countries with a geographic focus on the Middle East and Southeast Asia. The Abu Dhabi company's average working interest production in 2017 was around 320,000 bpd of oil equivalent.

The company in April signed the production sharing contract for Andaman I in Indonesia, which was awarded by Jakarta in the 2017 licence round. Mubadala Petroleum is the operator of Andaman I and a partner in Andaman II, operated by UK-based Premier Oil. The two adjacent fields are located in the under-explored North Sumatra basin offshore Aceh, a region where Mubadala Petroleum has been active since 2011 through joint study agreements.

Mubadala Petroleum’s parent company invests globally and manages over $200 billion of assets through a diversified portfolio spanning 13 sectors and 30 countries. Mubadala's Petroleum and Petrochemicals platform currently values its portfolio at $40bn, with just over $8bn spent in the last year alone in a raft of upstream and downstream investments.

Mubadala Petroleum and Petrochemicals is seeking lower-cost barrels of oil at home and across Asia, even as it positions itself as a strong player in the North American natural gas and chemicals industry, its chief executive Musabbeh Al Kaabi told The National in March.