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EBRD, HypoVereinsBank in major Russian oil investment
$200 million loan to Russo-Finnish venture reflects high environmental standards
The European Bank for Reconstruction and Development and Germany's HypoVereinsBank have co-arranged a $200 million loan to SeverTEK, an equal partnership between Russia's biggest oil producer, LUKoil, and Finland's state-controlled Fortum energy group to develop an oilfield north of the Arctic Circle.
HypoVereinsBank has underwitten half of the loan, which will be further syndicated to a consortium of international banks.
The deal offers an alternative structure to Russia's Production Sharing Agreements (PSAs) and the EBRD hopes it will create a new model for cooperation between Russian and western energy companies, said Kevin Bortz, Director of the EBRD's Natural Resources Team.
A successful combination of foreign and Russian technology should achieve significant cost savings and underline yet another benefit of foreign-local partnerships in the Russian oil industry, Mr Bortz added at a signing ceremony in Moscow.
The six-year deal is the biggest that the Bank has led for Russia's onshore oil sector since a $150 million working capital loan to LUKoil signed two years ago.
The loan will be used to finance drilling and the construction of a pipeline and other infrastructure needed to bring on-stream SeverTEK's largest field at South Shapkino in the Timan Pechora basin, 70 km north of the Arctic circle.
The field has proven plus probable reserves of 164 million barrels of oil. The estimated cost of the project is $355 million.
Fortum and LUKoil will equally provide technical and marketing support - with Fortum, which has shown considerable commitment to "green technologies" in the energy sector, providing a special focus on environmental issues.
LUKoil, which has significant other activities in the region, will bring unique local knowledge and expertise to the project.
Under the Environmental Action Plan to which Fortum and LUKoil have committed, steps will be taken to minimise the project's ecological impact and protect the permafrost environment.
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