June 7, 2019 / 11:34 AM / 9 days ago

OMV to pay Gazprom $1 billion for stake in Siberian gas field

VIENNA (Reuters) - OMV agreed on Friday to pay 905 million euros ($1 billion) to Russia’s Gazprom for a stake in a Siberian gas field, as part of the Austrian firm’s strategy to boost its gas business.

The logo of Austrian oil and gas group OMV is seen at a gas station in Vienna, Austria, October 30, 2018. REUTERS/Heinz-Peter Bader/File Photo

OMV Chief Executive Rainer Seele is banking on a sharp rise in demand for natural gas as a low-emission alternative to oil in power generation and heavy transport including trucks.

OMV’s planned purchase of 24.98% of the Achimov IV and V phase developments at the Urengoy gas field is also part in OMV’s strategy to focus production in low-cost countries.

The Austrian firm also said Gazprom would supply it with 1.2 billion cubic meters of liquefied natural gas (LNG) in 2020.

The companies plan to work together on conventional and small-scale LNG cargo projects and have agreed to “explore options for the joint development of small-scale LNG infrastructure projects,” OMV said.

“We have been receiving reliable gas supplies from Russia for more than 50 years, now we are extending our cooperation to LNG,” said Seele. “This will contribute to the diversification of sources of supply and help us safeguard security of supply in Europe.”

OMV has a stake at the LNG terminal in Rotterdam, but that has not been a key focus for the company so far.

Production at the Achimov blocks is forecast to start next year. In 2026, the fields are expected to generate more than 80,000 barrels of oil equivalent per day (boe/d).

OMV’s other Russian gas asset, a stake in the Yuzhno Russkoye field, currently delivers around 100,000 boe/d, but that is expected to decrease in coming years.

OMV produced 474,000 boe/d in the first quarter, more than 20 percent of it in Russia. It has a production target of 600,000 boe/d by 2025.

OMV said its total investment in the Achimov blocks is expected to amount to 950 million euros up to the end of 2044.

Seele started negotiating access to the giant Urengoy gas field in 2015.

A year later, he signed an agreement to swap some of OMV’s Norwegian assets for the Achimov stake, but the plan fell through last year amid resistance from Norway and OMV decided to buy the stake.

The transaction still requires approval from OMV’s supervisory board, an agreement with Gazprom on the final documents, and regulatory approvals, OMV said. The deal is expected to be finalised by the end of this year.

($1 = 0.8879 euros)

Reporting by Kirsti Knolle; Editing by Jason Neely and Mark Potter

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