UPDATE 2-Novatek, Gazprom Neft to buy Eni stake in SeverEnergia, challenging Rosneft

Wed Nov 20, 2013 11:03am EST

Related Topics

* Italian Eni to be paid cash on completion of the deal

* Enel earlier sold SeverEnergia stake to Rosneft

* Tensions are high on Russian gas market as LNG reform looms (Adds details, background, analyst)

By Stephen Jewkes and Denis Pinchuk

MILAN/MOSCOW, Nov 20 (Reuters) - Russia's Novatek and Gazprom Neft agreed to pay $2.94 billion for Italian oil and gas group Eni's stake in gas producer SeverEnergia, clashing with Kremlin-controlled Rosneft as domestic gas reform looms.

Russia's gas sector, long dominated by the world's biggest gas producer Gazprom, is rapidly changing thanks to aggressive players, Novatek and Rosneft, which both lobbied for the opening up of super-cooled gas exports.

At the same time, both are expanding in Russia, snapping up assets and tens of billions dollars in industrial supply contracts from Gazprom, whose domestic share narrowed to 73 percent last year, down three percentage points in just a year.

SeverEnergia is expected to produce 36 billion cubic metres (bcm) of gas and liquids by 2017, two thirds of Novatek's current gas production. Rosneft, led by CEO Igor Sechin, plans to more than double its own gas output to 100 bcm by 2020.

Last week, Rosneft bought Enel's 40 percent stake in Italian-owned holding company Arctic Russia B.V., giving it a 19.6 percent interest in SeverEnergia. The rest of Arctic Russia B.V. is owned by Eni.

SeverEnergia, which means Northern Energy, is itself 51 percent-owned by a joint venture between Gazprom Neft and Novatek, while 49 percent belongs to Arctic Russia B.V.

"SeverEnergia has a high gas and oil potential. It is a very lucrative asset for all - Rosneft, Novatek and Gazprom Neft," said Andrey Polischuk, an analyst with Raiffeisenbank.

In a statement Eni, one of the biggest gas customers of Russia's Gazprom, said it would be paid in cash when the deal was completed and would exit upstream development in Siberia.

Eni has a joint venture with Rosneft for exploration in the Barents Sea and the Black Sea. It is also a partner of Gazprom in the South Stream gas pipeline project which will carry 63 bcm of Russian gas per year into Europe.

Eni originally bought the stake for $600 million.

TENSIONS

Gennady Timchenko, a co-owner of Novatek, has publicly expressed his opposition to the Rosneft's deal, saying that Novatek and Gazprom Neft were in talks to buy out Enel on their own.

"It would have been probably appropriate if we had held talks with Rosneft before they announced their agreements with the Italians," he told Kommersant daily last month.

In a swipe at Rosneft's chief executive, Timchenko added: "Unfortunately for us, Igor Sechin is a very busy man ... and that's probably why he missed an opportunity to talk to us before the deal was signed."

According to some Russian media reports, Rosneft has, through its purchase of Enel's stake, acquired the pre-emptive right to buy out Eni's SeverEnergia holdings as well.

In a comment to Reuters, Rosneft spokeswoman said that as a shareholder with SeverEnergia, the company is closely watching the development of the situation. Rosneft declined to comment on whether it was going to bid for the rest of the firm. (Reporting by Stephen Jewkes in Milan; Katya Golubkova and Denis Pinchuk in Moscow; Editing by Jane Merriman and David Evans)

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