Rosneft Expands in Middle East With Libya and Iraq Oil Deals

  • Company to explore in Libya, buy crude from Iraq Kurds
  • Rosneft widens footprint as Russia’s influence grows: Weafer

Rosneft PJSC, the state-run producer headed by a close adviser of Russian President Vladimir Putin, is expanding its footprint in the Middle East by striking new oil deals with Iraq’s Kurdish region and Libya.

Russia’s largest oil producer agreed to buy crude from Libya’s National Oil Corp., the state-run NOC said Tuesday on its website, without specifying the amount. The deal also provides for Rosneft to invest in exploration and production in the North African country. The Russian company announced on the same day it will buy Kurdish oil until 2019 and will study exploration and production opportunities in Kurdish areas, it said in a statement.

“These deals combine potentially good economics for Rosneft and good politics for the Kremlin,” Chris Weafer, a partner at Macro Advisory in Moscow, said Tuesday by e-mail. “Expect more deals from Rosneft in the Middle East and North Africa and across the developing world.”

Rosneft’s new deals in the region come as Russia asserts its political influence in the Middle East, Weafer said. The Russian producer, in which Qatar bought a holding in December, agreed in the same month to buy a $2.8 billion stake in Eni SpA’s giant Zohr gas field in Egypt. It’s also drilling its first exploration well at Block 12 in southern Iraq.

Russian Ties

Russian companies and diplomats have been making inroads in several Arab countries, reviving political, arms-trading and energy relationships. Russia, which overtook Saudi Arabia as the world’s largest crude producer in December, has imposed itself as a major power in war-torn Syria and rebuilt strong links with Egypt. Putin has forged ties with Libyan military leader General Khalifa Haftar, who has been gaining ground against rivals in that divided nation.

Rosneft, mostly owned by the Russian government, has focused historically on its domestic business. The company’s largest overseas projects are in Venezuela.

Rosneft will be “developing new markets worldwide for Kurdish crude oil,” Chief Executive Officer Igor Sechin said in the company’s statement. “The offtake and supply of Kurdish crude oil into Rosneft’s expanding worldwide refining system will further contribute to the increase in its effectiveness.”

For Libya, Rosneft’s involvement is part of a bigger push to encourage investments by foreign oil companies to help the nation increase its production to 2.1 million barrels a day by 2020, according to the NOC statement. Rosneft’s press service declined to comment on the Libya deals when contacted by phone. Libya currently produces about 700,000 barrels a day.

“We need the assistance and investment of major international oil companies to reach our production goals and stabilize our economy,” NOC Chairman Mustafa Sanalla said in the Libyan company’s statement.

Oil Output

Libya, with Africa’s largest oil reserves, is trying to revive oil output and sales in spite of political uncertainty and internal conflict. Any increase in production there may complicate efforts by the Organization of Petroleum Exporting Countries to end a global crude glut. Libya pumped 1.6 million barrels a day before a 2011 revolt set off years of fighting that prompted foreign investors to withdraw.

OPEC agreed with other oil producers including Russia to reduce their collective output by 1.8 million barrels a day, starting Jan. 1. Libya was exempted from the cuts as its works to restore its oil industry.

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