Rosneft, Inter RAO, sign €60bn deal

Rosneft and INTER RAO have signed a 25-year contract for the supply of up to 875 billion cubic metres (bcm) of gas.

The agreement is for annual supplies of up to 35 bcm of Rosneft-produced gas to the power plants of INTER RAO a major Russian exporter and energy operator established in 1997. The effective period begins on January 1, 2016, and goes through until the end of 2040 on a take-or-pay basis.

Reuters analysts estimate the deal is worth $80 billion (€61 bn) based on the wholesale regulated price for natural gas in 2011.

Under the agreement, natural gas and dry stripped gas will be supplied from oil fields, which will allow Rosneft to step up use of associated petroleum gas.

Rosneft president and board chairman, Igor Sechin, said: “Rosneft has significant reserves of gas and producing and selling this gas is a priority in terms of generating additional profit for Rosneft shareholders. Concluding an agreement to supply gas directly to Russia’s largest generating utilities is the most effective way to monetise our reserves. It will also guarantee fuel supplies for power generation on transparent terms.”

Boris Kovalchuk, chairman of the INTER board, said: “Our partnership with Rosneft, a global oil and gas major, is strategic in nature and will guarantee stable supplies of fuel to INTER RAO’ power stations.” He said the argreement would guarantee stablity for his company, and allow improved efficiency of its power generation in Russia.