Rosneft plans to keep controlling stake in Eastern Petrochemical Company after deal with ChemChina

VLADIVOSTOK, September 4. /TASS/. Rosneft plans to keep a controlling stake in Eastern Petrochemical Company after a deal with the ChemChina, Rosneft CEO Igor Sechin told journalists Friday. "We will specify the shares later, but the main point is that they are going to arrange the financing. Rosneft, in any case, keeps the controlling stake," he said. As TASS reported earlier, On September 3, 2015, Rosneft and China National Chemical Corporation (ChemChina) signed the basic terms of an agreement on cooperation in equity investment in ChemChina Petrochemical Corporation (CCPC) and a Memorandum of Understanding for cooperation on the project of the Far-East Petrochemical Company (FEPCO). Russian Deputy Prime Minister and Presidential Envoy to the Far East Federal District Yuri Trutnev earlier told TASS that Rosneft had not yet made a final decision on the FEPCO project. He said that Rosneft was experiencing difficulties with financing sources and some technological issues. The CCPC agreement signed on Thursday stipulates Rosneft’s planned subscription for a 30% stake in CCPC and follows the signing of a memorandum in June 2015 at the St. Petersburg International Economic Forum. "The document signed in Beijing outlines the preliminarily agreed price, the transaction structure and the corporate governance issues," Rosneft said in a statement. The FEPCO Memorandum concerns ChemChina's proposed acquisition of a majority stake in the FEPCO project and also the key stages of such investment. "By signing the memorandum, Rosneft involves a strategic partner for FEPCO project and makes a major step towards its development," the statement said. Also, Rosneft and ChemChina signed a memorandum agreeing to supply the ESPO, Sokol or alternative crudes and other feedstocks to CCPC as mutually agreed by the parties. According to the document, the parties will hold negotiations on signing a long-term contract for 4 million tons delivered within three years with an option to extend supplies and increase the contract duration. "Delivery of the signed documents will enable Rosneft to significantly enhance its positions on the Asia-Pacific region energy market and China in particular. Cooperation with ChemChina will enable Rosneft to obtain a brand new opportunity to produce and market its products in each segment of the value chain through to the end consumer," Rosneft’s statement said. FEPCO Deputy General Director Alexei Zharov said in February the project of establishing Rosneft’s petrochemical facility in the Primorye Territory in the Russian Far East might be included in the list of advanced development territories enjoying a preferential tax regime. ‘We’ll certainly be increasing the project's efficiency with all effective means," Rosneft CEO Igor Sechin said in reply to a journalists’ question about whether the facility could be built amid the Russian government’s tax maneuver envisaging a gradual decrease in export duties on oil and petroleum products and a simultaneous rise in the minerals extraction tax. Rosneft has established Far-East Petrochemical Company (FEPCO) to implement the project of building a petrochemical facility in the Primorye Territory with a refining capacity of 30 mln tonnes. Rosneft expects to launch the first stage of the project with an oil refining capacity of 12 million tons in the fourth quarter of 2020 while the second stage with a capacity of 3.4 mln tonnes of petrochemical raw materials a year is expected to go on line in the fourth quarter of 2022. The third stage can be implemented amid the favorable market situation. After its launch, the project’s refining capacity will expand to 30 million tons a year and 6.8 mln tonnes of petrochemical raw materials annually. Read more