PTR.L Regulatory News (PTR)

PetroNeft Resources plc

29th 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.

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