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254
255
Current and non-current portions of decommissioning provision are as follows:
31 December 2011
31 December 2010
Current portion
-
14
Non-current portion
295
217
Total
295
231
The Group’s decommissioning provision relates primarily to the conservation and liquidation of wells, pipelines and
other oil and gas facilities and site restoration. Key assumptions used for evaluation of decommissioning provision
were as follows:
Discount rate
9.49%
12.38%
Inflation rate
2.55%-10.09%
2.25%-10.81%
The Group has estimated the costs to be incurred using the cost of technology and materials that are currently
available.
12. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
Year ended 31 December 2011
Year ended
31 December 2010
Investments
in associates
Investments in
joint ventures
Investments
in associates
Balance at the beginning of the year
667
-
-
Reclassified from available-for-sale
investments
-
-
545
Acquired during the year
-
-
123
Acquisition of the controlling interest in
BN-Nefteproduct
(119)
-
-
Loss of controlling interest in subsidiaries
-
351
-
Share of post-acquisition profits
75
-
36
Impairment
-
-
(17)
Effect of translation to presentation currency
(26)
(10)
(20)
Balance at the end of the year
597
341
667
Joint venture
27 December 2011
ASSETS
Exploration and evaluation assets
60
Trebs and Titov oilfield license
592
Trade and other accounts receivable
19
Cash and cash equivalents
111
782
LIABILITIES
Deferred tax liabilities
(118)
Borrowings
(171)
Trade and other payables
(24)
(313)
Net assets disposed of
469
The result from the sale of the ownership interest in Bashneft-Polyus is summarized in the following table:
27 December 2011
Consideration received
153
Less: Carrying amount of the Group’s 25.1% interest in the net
assets
(118)
Gain on sale of ownership interest
35
The Group recognised income tax expense in the amount of USD 31 million associated with this transaction.
The following table reconciles the carrying value of Bashneft-Polyus prior to disposal and the carrying value of the
retained investment in the entity recorded under the equity method:
27 December 2011
Carrying value of the net assets disposed of
469
Less: carrying amount of the Group’s 25.1% interest in the net
assets disposed
(118)
The carrying value of equity investment
351
From the date of establishing the joint venture in Bashneft-Polyus until 31 December 2011, the joint venture did not
perform significant operations.
The following is a summary of the financial information of joint venture:
31 December 2011
Non-current assets
692
Current assets
63
Non-current liabilities
(281)
Current liabilities
(19)
Net assets
455
Group’s share of the net assets of the joint venture
341
As of 31 December 2011, the Group’s share in capital commitments of the joint venture was USD 15 million.
Associates
The Group holds 38.5% interest in OJSC “Belkamneft”
(“Belkamneft”), a company engaged in the production
of crude oil. At 31 December 2009, the Group’s 38.5%
interest in Belkamneft was classified as an available-
for-sale investment as the Group was not able to
exercise significant influence over the operating and
financing activities of the investee. On 23 April 2010,
JSFC Sistema (the Group’s parent company) acquired
49% interest in OJSC “Russneft” (Belkamneft’s
parent Company). As a result of this transaction, the
Group obtained significant influence over Belkamneft
and reclassified the investment in Belkamneft from
available-for-sale to investments in associates. The
excess of the fair value of the investment over the
carrying value in the amount of USD 477 million
was recognised in the statement of comprehensive
income as gain on reclassification of available-for-
sale investments to investments in associates.
On 31 July 2010, the Group acquired 49.99% interest
in OJSC “Aspec” from a related party for a cash
consideration of USD 123 million. OJSC “Aspec” is
the holding company of the Aspec Group (“Aspec”).
Aspec is engaged in wholesale and retail of oil
On 27 December 2011, the Group entered into
agreement with OJSC “Lukoil” in relation to
development of Trebs and Titov deposit through
sales of 25.1% shares in LLC “Bashneft-Polyus”
(“Bashneft-Polyus”) for cash consideration of USD
153 million and entering a joint venture agreement.
Although the Group has 74.9% interest in
Bashneft-Polyus, this investment is classified as
an investment in joint venture (refer to note 3).
As a part of the establishment of the joint
venture, the Group issued a loan to Bashneft-
Polyus in the amount of USD 171 million at
8.25% per annum which is expected to be repaid
as the development and production stage of
Trebs and Titov deposit commences; and the
Group sold to Bashneft-Polyus exploration and
evaluation assets for a cash consideration of USD
60 million. No gain or loss was recognised on these
transactions.
As of the date of reclassification of investment
the value of the interest retained by the Group
approximates the fair value.
At the date of reclassification of investment carrying amount of assets and liabilities in Bashneft-Polyus was as follows: