16 April 2004 03:22
Abramovich Strikes Oil in Chukotka
While Roman Abramovich's Sibneft is mainly the focus of market attention for whether it will demerge from Yukos,
in faraway Chukotka the big news Thursday is that the firm has struck oil.
While the estimated 2.2 million tons of oil may not make Chukotkans rich -- or Abramovich significantly richer -- the
company hopes the find will bring the region Abramovich governs one step closer to self-sufficiency.
Closer to Alaska than Moscow and cut off from the rest of Russia for the better part of the year, Chukotka's
survival depends on supplies, including fuel, to be shipped in during the warmer summer months when navigation is
possible in its icy waters.
By Sibneft's own admission, the Verkhne-Telekaiskoye field is not large enough to warrant building a pipeline
from it, "but you could put up a mini-refinery and supply all of Chukotka with fuel," Sibneft spokesman John
Mann said.
While the entire field's output, were it to be sold at world market prices, could bring in as much as $500
million -- enough for Abramovich to buy another couple Chelseas -- the likelihood of that happening is remote.
"It's not going to be a huge moneymaker but it fits in well with the governor's strategy," Mann
said.
Under his Chukotka self-sufficiency strategy, Governor Abramovich is pulling in many of the assets of oil magnate
Abramovich to the vast region, where his term ends in late 2005. He has said he will not run for reelection.
To date, Sibneft has thrown 2 billion rubles ($70 million) at oil exploration in Chukotka.
Work is under way on bringing a gas pipeline from Sibneft's Zapadno-Ozyornoye field to Anadyr, Chukotka's
capital. The gas it brings will be used to fuel a new power station that will replace coal-powered facilities currently
in use.
Abramovich's holding company, Millhouse Capital, is active in other areas of the Chukotkan economy as well.
Millhouse's Planeta Group built Anadyr's first supermarket in 2002, while its meat products company, Omsk
Bacon, is in the process of setting up a pig and chicken farm there.
By Sibneft standards, the Verkhne-Telekaiskoye field is a guppy, as one of its largest fields, Sugmut in the
Yamal-Nenetsk region, holds over 300 times more oil.
But experts say the new field may be the tip of an iceberg, and despite claims that it is his intention to get
Chukotka on its feet, Abramovich may have secured his governorship there to exploit its drilling potential.
"Being governor can help clear some of the roadblocks to drilling where you want and when you want," said
Renaissance Capital oil analyst Ron Smith. "You always have to have good relations with the local
administration."
At a new site, initial oil reserve estimates are usually very conservative, Smith said, and the Verkhne-Telekaiskoye
field could prove to be two or three times larger than the 2.2 million tons Sibneft assigned it Thursday.
Sibneft has already drilled two other wells, but this is the first in Chukotka to yield oil. The company is
continuing exploration activities in the region, where it holds licenses for three onshore sites and three offshore
sites in the adjacent Bering Sea.
"The Eastern shelf is very promising in general," said Troika Dialog analyst Valery Nesterov, referring to
the sea basin just east of Chukotka. "There could be billions of tons of oil, but the area is largely
unexplored."
"The exploration Sibneft is conducting is not very expensive compared to some of the drilling going on abroad,
but there are a lot of public relations involved," Nesterov said.
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[The Moscow Times] |
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