Russia's Rosneft and Italy's Eni announced Monday that they have agreed a loan deal to finance geological exploration in three license blocks offshore Russia.
The deal, part of a wider cooperation agreement between Italy and Russia, was signed in Moscow by Eni CEO Paolo Scaroni and Rosneft vice president Igor Pavlov in the presence of Russian Prime Minister Dmitri Medvedev and Italian PM Mario Monti, who is on his first official visit to Russia. Under the agreement, Eni will fully finance geological works for the Fedynsky and Central Barents blocks in the Barents Sea as well as the Western Chernomorsky block in the Black Sea.
Expenses for geological exploration outside of the license obligations will be split between the companies in line with their stakes in the projects. The two companies are to form joint ventures to work on the projects in which Eni will hold a one-third interest, while Rosneft will hold two thirds.
In addition, Eni will compensate the majority of historical costs on completed geological works at the Russian offshore blocks. The Italian firm's investment will be returned from project cash flows once production is launched at any of the blocks.
Eni's licensing obligations stipulate that the following works must be completed:
Eni stated that the signing "represents another important step towards the commencement of exploration activities in two areas of great mining potential, and strengthens the partnership between Eni and Rosneft, which is strategic for the development of Eni's activities in the Russian upstream".
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