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Rosneft expands into gas market with $1.4-bn buy

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(Globalpost/GlobalPost)

Russian oil giant Rosneft on Friday agreed to purchase the natural gas assets of top world diamond producer Alrosa for $1.38 billion as it expands into a market dominated by its rival Gazprom.

Rosneft said it had also selected two contractors to design a liquified natural gas (LNG) plant in Russia's Far East that it plans to operate under an agreement with US energy giant ExxonMobil.

Auditors at Texas-based DeGolyer and MacNaughton estimate that the three Siberian fields acquired by Rosneft from Alrosa contain 187 billion cubic metres (6.6 trillion cubic feet) of natural gas and 26.4 tonnes of gas condensate.

"The acquisition of Alrosa's energy assets once again demonstrates the importance of gas business development of Rosneft," the state-held firm's chief executive Igor Sechin said in a statement.

Alrosa head Fyodor Andreyev said the diamond producer decided to part with its energy assets in order to focus more closely on its core business.

Rosneft has pursued the opposite strategy as it tries to diversify away from crude production amid slumping output at its primary Soviet-era fields.

Sechin had once pushed for the idea of Russia combining Rosneft and Gazprom into a colossus that would dominate the world market in both oil and gas.

Gazprom has tried to fight off the idea amid fears that the joint company would be run by Sechin -- seen as a close confidant of Russian President Vladimir Putin.

Sechin has more recently eased off on the idea of a union and instead pushed Rosneft ever further into the natural gas market.

A key part of that business involves LNG sales to energy-hungry clients in Japan and other significant Asian markets.

The gas liquefaction plant planned by Rosneft and ExxonMobil would produce five million tonnes of LNG per year by 2018.

The project has been bitterly opposed by Gazprom and is yet to be formally approved by Putin's government.

Rosneft said it and ExxonMobil Russia have hired the design and engineering firms CB&I UK and Foster Wheeler Energy to develop the final plans for the plant and its accompanying gas liquefaction technology.

The plant is meant to be built on the Russian Pacific coast's Sakhalin Island -- a region that ExxonMobil first entered in 1996.

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http://www.globalpost.com/dispatch/news/afp/130927/rosneft-expands-gas-market-14-bn-buy