REG - Petroneft Resources - Operations Update

Petroneft ResourcesAnnouncement

30/08/2022 07:17

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RNS Number : 4540X  Petroneft Resources PLC  30 August 2022

PetroNeft Resources plc

29(th) August 2022

 

 
PetroNeft Resources plc ('PetroNeft' or 'the Company')

 

 

Operations Update

 

PetroNeft (AIM: PTR) an oil & gas exploration and production company,
operating in the Tomsk Oblast, Russian Federation, and 90% owner and operator
of Licence 67 and 50% owner and operator of Licence 61 announces the Temporary
Suspension of Oil Acceptance and Transfer from Licence 61 by Nord Imperial LLC
(wholly owned subsidiary of ONGC).

Background

 

In 2009, prior to starting up production from Licence 61, Stimul-T LLC, owner
and Operator of Licence 61, (wholly owned by WorldAce Investment Ltd., a
company owned equally by PetroNeft Resources Plc and Oil India Limited) signed
a contract with Nord Imperial LLC to cover the storage and transfer of oil by
pipeline from Licence 61 to the Transneft Entry point at Zavyalovo, from which
it is then transported to either the domestic or international markets.

 

PetroNeft has for some time considered the terms of the contract tariff to be
significantly higher than normal market rates due to US dollar denomination
and a quarterly inflator which makes the contract increasingly uncompetitive.
Since inception of the contract these terms have seen transportation costs
increase by 4.8 times and about two and a half times faster than the increase
in the Transneft national tariff rate over the same period.  The Company has
been in discussions with Nord Imperial for many years trying to secure more
market standard rates as, without such, further investment in Licence 61 is
hard to justify.  To date, all discussions have not resulted in any
meaningful offer or agreement. According to our estimate, the total amount
paid to Nord Imperial up to date is one and a half times more than the cost of
building the pipeline initially meant for their own use.

 

In 2021, to protect the Company's position, and due to no progress in our
attempts to find a more equitable outcome since 2015, Stimul-T started
remitting payments to Nord Imperial at a reduced level while at the same time,
launching a series of legal cases against Nord Imperial, the latest one
including a submission to the Russian Anti-Monopoly Committee which is about
to be submitted

 

Nord Imperial have responded by temporarily suspending the acceptance of our
oil and transfer until the debt claimed on the basis of the monopolistic
contract terms is paid in full. As the Company currently have no other export
route from Licence 61, Petroneft is progressively shutting down its wells
until the situation can be resolved.

 

Production from Licence 67 is unaffected by this situation with the C-4 well
continuing to produce at ± 270 BOPD.

 

Further announcements will be made in due course as appropriate.

 

 

 

 

David Sturt, CEO PetroNeft commented:

 

"The contract with Nord Imperial for the transfer of our oil from Licence 61
is far above standard market rates, and we believe Nord Imperial has, for many
years, been acting in a monopolistic manner, charging non-competitive tariff
rates. The suspension of acceptance of our oil, whilst disappointing, will not
change our determination to seek an equitable solution for both parties.

We will work hard with our partner (Oil India Limited) and Nord Imperial to
resolve this issue as our priority is to protect the interests of our
shareholders".

 

This announcement contains inside information within the meaning of the EU
Market Abuse Regulation 596/2014. Upon the publication of this announcement,
this inside information is now considered to be in the public domain.

 

For further information, contact:

 David Sturt, CEO, PetroNeft Resources plc               +4407903 869608
 Brain Garrahy/Ciara O'Mongain (NOMAD and Broker)        +353 1 679 6363
 Paul O'Kane, Murray Consultants                         +353 1 498 0300

 

 

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