Foreign projects
Annual report JSOC Bashneft 2013
50
Foreign projects
Annual report JSOC Bashneft 2013
51
ABOUT
THE COMPANY
OPERATING RESULTS
APPENDICES
CORPORATE GOVERNANCE
INFORMATION FOR
SHAREHOLDERS AND INVESTORS
”
Our experience in international markets has confirmed that our high qual-
ity team has the knowledge and experience to implement successful inter-
national projects.
Alexander Korsik
President of JSOC Bashneft,
Chairman of the Management Board
Foreign projects
Gaining experience abroad
In 2012 and 2013, Bashneft won two tenders for explo-
ration at licence areas in Iraq and Myanmar.
These projects are not of a size that would make them
strategic or of material significance for the Company.
Rather, the goal of involvement in exploring Block 12
in Iraq and Block EP-4 in Myanmar, is to develop its
skillset for implementing international projects. The
knowledge gained through working with government
agencies, selecting and working with local and interna-
tional suppliers and contractors, planning, organisation
and project management in these projects will give the
Company extensive and varied experience.
New knowledge and competencies will open up more
prospects for scaling and geographically diversifying
our business, and will give us an opportunity to partici-
pate in potentially attractive tenders for large and im-
portant foreign projects. It is significant that the Com-
pany has been given operator status for these projects.
Iraq: exploration of Block 12
In 2012 Bashneft took part in the final stage of the fourth li-
censing round held by the Iraqi Ministry of Oil and was granted
exploration operator status for Block 12 as part of a consor-
tium with Premier Oil. Bashneft’s stake in the project totals
70%, with Premier Oil holding 30%.
Block 12 is located in the provinces of Najaf and Muthanna, ap-
proximately 80 km southwest of Samawah and 130 km west
of Nasriya. It is a part of the Western Desert, an unexplored re-
gion considered to have the greatest potential for oil production
in Iraq. The block covers an area of approximately 8 ths sq km.
In early August 2012, the Iraqi Ministry of Oil and the Con-
sortium (Bashneft and Premier Oil) initialled the exploration,
development and production service contract (EDPSC) for
Block 12, which was subsequently approved by the Council
of Ministers. Under the contract, the consortium paid its Iraqi
partners a signing bonus of US$ 15 million on a pro rata basis
(Bashneft and Premier Oil paid US$ 10.5 million and US$ 4.5
million respectively).
The obligatory five-year geological exploration programme
for Block 12 can be extended twice, for a two-year period each
time, and includes 3D seismic surveys covering 450 sq km
and the drilling of one exploration well. The contract also
stipulates that US$ 120 million must be invested in geological
exploration under the programme within a five-year period.
If commercial oil reserves are proved, a 20-year contract will
be signed, with a base royalty fee of US$ 5 per barrel. This
rate will be lowered once investments into the project have
been recouped and a certain level of profitability has been
reached. Payments will begin after 25% of the expected oil
production volume plateau is reached. The plateau level will
be determined after the end of geological exploration and
evaluation of reserves, and recorded in the development proj-
ect approved by the Iraqi Ministry of Oil.
The production launch date will be set and the rated capacity
will be assessed after the geological exploration programme
is implemented. To implement the project, JSOC Bashneft
established a steering committee in November 2012, and
a subsidiary, Bashneft International B.V., was incorporated
in December 2012.
In March 2013, the parties signed an agreement transferring
all rights and obligations under the project of OJSC Bashneft
to Bashneft International B.V.
Iraq: Block 12
Iraq
Jordan
Mosul
Kirkuk
Baghdad
Samawah
Nasiriyah
Block 12
Oil pipeline
Gas pipeline
Syria
Iran
In 2013, a joint venture agreement was signed with Premier Oil,
and a Joint Management Committee (JMC) was established.
Bashneft International B.V. (Iraq) opened a branch in Bagh-
dad and leased an office. The South Oil Company (SOC) and
the Iraqi Ministry of Oil approved the exploration programme.
The JMC approved project budgets for five years and for 2013.
Geological and Technical, Financial and Tender subcommit-
tees were formed, and regular in person or in absentia discus-
sions are held with subcommittee members to discuss issues
related to the projects. The JMC has also approved Accounting
Policies, Regulations on Hiring, and Regulations on Procure-
ment and Insurance.
In 2013-2014, tenders are being held to select contractors for
independent audit, insurance, accounting and tax registra-
tion, transport and security services, translation services, of-
fice repairs, seismic processing and interpretation of seismic
data, supervision, and security.
In 2014, an environmental impact assessment (EIA) was car-
ried out and the report was sent to the SOC for approval. Ap-
proval of an academic programme at Russian and British uni-
versities is planned for potential project employees who are
Iraqi citizens.
To date, the project is proceding to schedule and on budget,
and Iraq: Block 12 is progressing in a positive direction.
Myanmar: exploration project
at Block ЕР-4
In October 2013, the Myanmar Ministry of Energy announced
the results of the Onshore Blocks Second Bidding Round.
Bashneft gained the right to conclude a Production Shar-
ing Contract (PSC) for Block EP-4, with a stake in the project
of 90%. Bashneft’s partner in the project is Sun Apex Holdings
Ltd., one of the local companies recommended by the Myan-
mar Ministry of Energy, which has a 10% stake in the project.
Bashneft International B.V. will be the operator of the project.
The signature bonus will total US$ 4 million. Under the PSC
for Block EP-4, the participants will conduct a three-year geo-
logical exploration programme, which may be extended for
another three-year period and includes seismic surveys and
drilling of two exploration wells. Investments in the geological
exploration programme will total US$ 38.3 million.
Block EP-4 covers an area of 841 sq km and is located in the
Central Burma Basin. 2D seismic surveys of 132 linear kilo-
metres of the block were conducted, and three prospecting
wells were drilled. Block EP-4 is located in an area with a
well-developed oil and gas transportation and processing in-
frastructure.
The Production Sharing Agreement (PSA) for Block EP-4
is expected to be signed and work on the project started in the
near future.
Myanmar: Block ЕР-4
Bangladesh
Myanmar
China
Laos
Thailand
Block EP-4
