Courtesy of gulfnews.com

ConocoPhillips, one of the pioneers of foreign investment in the Russian oil and gas industry, has completed a full retreat from the country by selling out of its Polar Lights joint venture with Rosneft.

Conoco’s decision to exit from Russia after more than 25 years highlights the challenges facing foreign investors in the country’s energy sector, which has been hit by recent political tensions and the tumble in oil prices.

A Conoco spokesman said: “We sold our 50 per cent interest to Trisonnery Asset Limited. We no longer have operations in Russia.” Rosneft declined to comment on the identity of the buyer, and the Khotin family could not be reached for comment.

A spokesman for the US oil and gas producer confirmed it had sold its 50 per cent stake in the venture, which is focused on the far north-west of Russia. Rosneft, the Russian state oil company, also sold its stake in the asset last week, in a deal that valued the business at about $150m-$200m, according to one person familiar with the matter.

“In the past, the view was that hydrocarbons were scarce, Russia has a lot of them: we have to be there,” said Matthew Sagers, senior director of Russia & Caspian Energy at IHS. “Now, it’s very different: there are hydrocarbons in a lot of places – including Williston, North Dakota – so you don’t have to go off to these exotic places any more.”

Conoco – before its merger with Phillips – was one of the earliest western oil groups to invest in Russia, having started negotiations before the collapse of the Soviet Union. Its Polar Lights joint venture, registered in 1992, made it the largest foreign investor in the Russian energy sector in the early 1990s.

In 2004, Conoco increased its commitment to Russia, taking an 8 per cent stake in Lukoil, one of Russia’s largest oil producers, which it later raised to 20 per cent. However, the investment failed to give Conoco the access to Russia’s vast oil and gas reserves it had hoped for, and by 2011 it had sold off its stake. It also undertook a broader retreat from the region, selling a 30 per cent stake in a joint venture with Lukoil in 2012 and its stake in Kazakhstan’s troubled Kashagan field in 2013.

“Russia was a region where they said look, it’s not working; let’s get out,” said one person familiar with Conoco’s thinking. “It turned out to be a great decision.” Conoco first announced it would seek a buyer for its stake in Polar Lights last year. A person familiar with the deal said the joint venture had been sold to a company owned by the Khotin family.

Source: gulfnews.com