The signing of the agreement to buy the company, based in European Russia to the west of the Urals, testifies to "the successful development of cooperation between the leading national oil companies of Russia and China," Rosneft said.
State-controlled Sinopec (China Petroleum & Chemical Corporation), which is Asia's largest oil refiner, had already won a tender to buy a 96.7% stake in Udmurtneft from Russian-British TNK-BP [RTS: TNBP] for a reported $3.5 billion in June 2006, with a prior condition that it was to sell 51% of its stake to Rosneft.
The deal makes Sinopec the first company from energy-hungry China to gain access to oil assets in Russia, and comes amidst a tightening pressure by Russia's authorities on Western oil majors operating in the country.
On November 11 in China, the heads of Rosneft and Sinopec signed a shareholders' agreement, setting out principles of the company's joint management. On November 13, they agreed to set up a joint venture to run Udmurtneft's operations.
Udmurtneft accounts for more than 60% of oil production in the Russian republic of Udmurtia. Last year, the company produced 5.98 million metric tons (43.6 mln barrels) of crude with a daily output of 16,400 metric tons (115,000 bbl/d). The company's proven reserves as of December 31, 2005 were 78.4 million metric tons of oil (551 mln bbl), and estimated reserves stood at 131 million metric tons (922 mln bbl).
