(Adds comments by Rosneft and Crescent execs, background)
By Simon Webb and Amena Bakr
DUBAI, June 5 Russia's Rosneft (ROSN.MM) will
join the United Arab Emirate's Crescent Petroleum in a gas
concession in the emirate of Sharjah, Crescent said on
Saturday, the first Middle East foray for the Kremlin's oil
State-run Rosneft pumps over a fifth of Russia's oil and is
the largest oil company in the world's top crude producer.
Crescent is a privately-held energy firm based in Sharjah, in
the north of the UAE.
The deal is the first between the two companies after they
signed an agreement in mid-May to work on joint ventures in the
Middle East and North Africa region.
Rosneft will farm into Crescent's onshore gas concession in
Sharjah, Crescent said in a statement. The companies would
drill two wells in the 1,243 square kilometre concession with
an initial investment of 220 million dirhams ($59.91 million).
Rosneft will receive a 49 percent stake in the concession,
while Crescent will retain the remaining 51 percent, Crescent
Forty-nine percent of the initial investment will come from
Rosneft and 51 percent from Crescent, Rosneft's Middle East
representative Timur Rustamov told Reuters.
Crescent has held the 25-year gas concession in Sharjah
since February 2008.
There is currently no gas production from the concession
and no wells have been drilled.
"We are targeting gas reserves of approximately 2.4
trillion cubic feet and gas condensate of approximately 117
million barrels," Crescent Petroleum Executive Director Badr
Jafar told Reuters.
These are reserves that Crescent hopes to find in the
concession but the firm would have a more accurate idea after
the first two wells are drilled, Badr said.
The number of development wells that Rosneft and Crescent
would drill would depend on the results from the first two
wells, Badr added.
Gas produced would supply the UAE's grid, while the
condensates could be exported to international markets,
Crescent said. Condensate is light oil produced as a by-product
The UAE is the world's third-largest oil exporter. Most of
its crude and gas production and reserves are in the capital
emirate of Abu Dhabi, with much smaller reserves in the
The partnership between the two aims to capitalise on
Rosneft's technical expertise and financial strength and
Crescent's international operating experience and knowledge of
the MENA region.
"We look forward to achieving many more opportunities
together with Crescent Petroleum in the Middle East and North
Africa Region," said Rosneft chief Sergei Bogdanchikov in the
Rosneft and Russia's gas export monopoly Gazprom (GAZP.MM)
have repeatedly competed for different assets in Russia but
abroad both firms are seen as agents of the Kremlin's energy
Rosneft is working in upstream projects in Kazakhstan,
Venezuela and Algeria.
Rosneft has big expansion plans but has so far refrained
from aggressive purchases abroad due to what analysts describe
as the company's concerns about potential legal suits it could
face from former shareholders and managers of defunct oil firm
Rosneft became the owner of most of YUKOS' assets after the
Kremlin-inspired demise of Russia's former top producer and its
politically ambitious shareholders.
Aside from Iraq and the UAE, Crescent also has operations
in Egypt, Yemen and Oman.
The GCC, which Crescent and Rosneft are initially targeting
for gas opportunities, is a loose political and economic
alliance between Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and
the United Arab Emirates.
Last year, Crescent and UAE affiliate Dana Gas DANA.AD
formed a consortium with Austria's OMV (OMVV.VI) and Hungary's
MOL (MOLB.BU) that aims to pump enough gas from Iraq's
Kurdistan region to kick-start the Nabucco pipeline to Europe
(Editing by Jason Benham and Sugita Katyal)