Sibir Gets Approval for Acquisition of Evikhon Shares
The Board of Sibir has received the requisite approval from Russia's Federal Anti-Monopoly Service and has completed the transaction acquiring the 10% interest previously owned by Dana in Evikhon, Sibir's Russian subsidiary which is partnered with Shell in a 50/50 joint venture to develop the Salym group of oil fields in Western Siberia.
As announced on 10 March 2005, Sibir paid $28 million cash for Dana's interest and exercised its right under the acquisition agreement with Dana to nominate a third party to hold the shares on its behalf, pending Anti-Monopoly approval. The shares were held by Strand Associates Limited, the holding company of Strand Partners, Sibir's nominated advisor. With Anti-Monopoly approval the shares were transferred to Sibir's control effective June 3, 2005.
Completion of the acquisition brings Sibir's total interest in Evikhon to 92%. As previously announced, the remaining 8% of Evikhon will be acquired upon completion of the acquisition of Hitchens Global SA, a transaction which was previously agreed and approved by Sibir shareholders. The first part of the Hitchens transaction in which the remaining 8% of Evikhon will be acquired is expected to be completed by the end of June 2005.
OAO NK Evikhon and Shell Salym Development B.V. participate in a 50:50 joint venture in Salym Petroleum Development NV (SPD). SPD holds production licenses for all three fields of the Salym group of fields located in the Khanty-Mansiysk Autonomous Okrug in Western Siberia, 190 kilometres from the town of Nefteyugansk. It includes West Salym, Upper Salym and Vadelyp.
Field development began in late 2003 and infrastructure development and drilling activity has been rapid. Early production from West Salym, the largest of the fields began in December 2004, a year ahead of the schedule contemplated by the SPD Licence Agreement. 33 producing wells will come on stream in West Salym by late 2005. The field is expected to produce around two and a half million barrels in 2005. Production will grow rapidly upon completion of the Central Processing Facility and export pipeline linking the field to Russia's Transneft pipeline system in the 4th Quarter of 2005. The production from West Salym is expected to peak with at least 120,000 barrels per day by 2009, and production from all three fields is expected to peak with more than 150,000 barrels per day by 2011. Development and production from Upper Salym has already begun, and Vadelyp production is due to start in 2006.
By the end of 2005 the total amount of SPD expenditure for the Salym fields development will have reached US$650 mln. The total investment in the Salym Project will amount to US$ 1.25 billion, making it one of the largest investment projects with foreign capital in the Russian energy sector.
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