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Russia, Vietnam sign deals on energy, natural resources

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October 28, 2008

Russia, Vietnam sign deals on energy, natural resources
Russian firms Gazprom and United Company RUSAL signed deals on Monday to participate in natural resources projects in Vietnam as the Kremlin aims to triple annual trade between the two countries to $3 billion, reported Reuters.

Russian President Dmitry Medvedev presided over the signing of the deals, which will involve Gazprom exploring for oil and gas off the Vietnamese coast, during the visit to Moscow of his Vietnamese counterpart, Nguyen Minh Triet.

"The negotiations confirmed the framework for strategic partnership between Russia and Vietnam," Medvedev said after the meeting.

Russia still enjoys close ties with Vietnam formed during the Soviet era. Medvedev said talks had focused on increasing annual trade between the two countries first to $3 billion, and subsequently $10 billion, from over $1 billion in 2007.

He said the countries were prepared jointly to conduct "geological exploration in Vietnam, Russia and third countries".

Russian gas export monopoly Gazprom signed a 30-year agreement with Vietnamese state oil monopoly group Petrovietnam to explore four blocks of Vietnam's continental shelf. Gazprom said in a statement it would finance initial exploration work.

The companies' existing joint venture, Vietgazprom, will carry out the work. It is already exploring off Vietnam's coast.

Separately, the two sides created a new joint venture, Gazpromviet, to work in Russia and third countries. Gazprom subsidiary Gazprom Zarubezhneftegaz will own 51 percent and Petrovietnam 49 percent of the joint venture, which will work at the Nagumanosvkoye deposit in Russia's Orenburg region.

The blueprint for Russian-Vietnamese partnership in energy is Vietsovpetro, a joint venture between Petrovietnam and state-owned Zarubezhneft from the 1980s, which produces over 150,000 barrels of oil a day on average from the Bach Ho field.

UC RUSAL, the world's largest aluminium producer, signed a memorandum of understanding with Vietnamese company An Vien to build a 1.5 million-tonne-per-year alumina refinery to run on bauxite mined from the Binh Phuoc deposit in southern Vietnam.

UC RUSAL Chief Executive Alexander Bulygin told Reuters at the signing ceremony investment in the bauxite and alumina project was estimated at $1.5 billion. UC RUSAL would hold 51 percent of the joint venture and An Vien 49 percent, he said.

Construction is scheduled to begin in the first quarter of 2012 after a preliminary feasibility study is conducted next year and in 2010, UC RUSAL said in a separate statement.

"The Asia-Pacific region will play an important role in UC RUSAL's business development. This MoU on construction of a bauxite and alumina complex is part of our strategy to expand our raw materials base," Bulygin said in the statement.

Vietnam has the world's third-largest explored reserves of bauxite, the raw material from which alumina, and aluminium metal, is made.

UC RUSAL, which produces about 15 percent of the world's alumina, said Binh Phuoc contained about 700 million tonnes of bauxite from a national total in excess of 3 billion tonnes.

Vietnam is also prepared to invest at least $750 million in a $1.5 billion joint venture to build a fertiliser plant in the Russian republic of Kalmykia, the republic's president, Kirsan Ilyumzhinov, told reporters after the signing ceremony.

The plant would be built next year and would generate $1 billion in annual sales at today's fertiliser prices, he said.

The Russian and Vietnamese presidents also discussed the participation of several other Russian companies in Vietnam's natural resources, automotive and telecoms sectors.

These companies include steel makers Evraz Group and Mechel, truck maker KamAZ, car producer Gaz GAZA.RTS and Vimpelcom, Russia's No. 2 mobile phone operator.

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