A&O and Morgan Lewis lead as Russia’s Rosneft signs Arctic gas deal

Allen & Overy (A&O) and Morgan Lewis & Bockius scooped roles as Russian oil major Rosneft completed a strategic joint venture with natural gas producer Itera to jointly develop gas fields in the Russian Arctic.

Rosneft retained A&O for the deal, led by Moscow-based corporate head Anton Konnov and energy partner Tim Shilling.

Morgan Lewis acted for Itera, fielding a team of former Dewey & LeBoeuf lawyers. The Moscow team included business and finance partners Roman Dashko and Jonathan Hines, oil and gas partner Dina Kzylkhodjaeva, corporate counsel Elena Savrasova and corporate associates Alexander Marchenko and Dmitry Tochkin. London-based finance associate Nick Nigam also provided advice on English-law aspects of the agreement.

Itera’s head of legal Vladislav Ilchuk and deputy Mikhail Petoukhov led the in-house team on the deal.

Many of the deal documents were governed by English law, but the agreement was heavily immersed in Russian law issues as almost all of the assets at stake were in Russia.

The completion of the joint venture culminates months of negotiations after the two companies originally signed an agreement in February indicating their intention to jointly explore and develop gas deposits in Russia. The two firms were retained in identical roles last month when Rosneft acquired a 6 per cent stake in Itera to strengthen its presence in the central and eastern European gas market.

The joint venture will see Rosneft increase its stake by 51 per cent stake and will give Itera a 49 per cent stake in the venture, known as the natural gas production and sales joint venture. Under the terms of the agreement, Rosneft will also contribute a 100 per cent stake in Kynsko-Chaselskoye Neftegas, which currently holds the licence for the Kynsko-Chaselsky section.

Rosneft will also pay $173.4m (£109.8m) in compensation, which may be subject to adjustment following a financial assessment.

Itera has operations throughout Russia, the CIS and Turkmenistan. The joint venture comprises the company’s gas assets, which includes 49 percent of Sibneftegaz, 49 percent of Purgaz, 67 per cent of Uralsevergaz and several other assets, including Rosneft-owned deposits in the Kynsko-Chaselsk group. While the financial value has not been disclosed, the terms of the deal will see the joint-venture company become the third largest gas producer in Russia, Morgan Lewis said.

Background to this deal

A&O has been a longstanding adviser to Rosneft. It previously advised the company on its acquisition of a 50 per cent stake in Ruhr Oel from state-owned Venezuelan oil and gas company Petróleos de Venezuela (PdVSA) in 2010. Shilling led on the deal, while Curtis Mallet-Prevost Colt & Mosle acted for PdVSA.

Freshfields Bruckhaus Deringer acted for the Russian oil giant last year when it signed a £10bn share swap deal with BP. Linklaters acted for BP on the deal (24 January 2011). The firm was also retained by Rosneft when the deal fell apart following a dispute with Russian investors in TNK-BP, BP’s existing Russian joint venture, and when it signed a deal with ExxonMobil, with Skadden Arps Slate Meagher & Flom acting for the US multinational (31 August 2011).

This was the first major deal in which Morgan Lewis was retained to advise Itera. All of the Morgan Lewis lawyers were former members of now-defunct Dewey & LeBoeuf and jumped ship to the firm in May this year (4 May 2012).