As I discussed last month, M&A activity is returning to the oil and gas sector, as a rebound to $50 crude is encouraging the world’s biggest producers to sift through assets that are increasingly coming up for sale. And a spate of news this week suggests they’re finding attractive deals — in a completely unexpected part of the world. Russia.

The news on M&A in the Russian oil patch kicked off last Friday, when super-major BP said it is forming a new joint venture with Russia’s Rosneft— to focus on exploration and development in West Siberia and the Yenisey-Khatanga basin of northeastern Russia.

BP noted that the venture will be sizeable — with an initial planned investment of $300 million by the western firm. In exchange for this funding, BP will get 49 percent ownership in the JV, while Rosneft will hold 51 percent (with Rosneft itself being 20 percent owned by BP).

The really interesting part is that the new venture is largely grassroots. With the joint venture planning to survey 260,000 square kilometers of prospective lands using regional scientific research, seismic surveys and exploratory drilling. Related: Slavery At Sea: The Ugly Underbelly Of Oil Shipping

That shows a lot of confidence from one of the world’s largest oil companies in Russia’s discovery potential. And BP isn’t the only company looking to this part of the planet for future growth. Forbes reported yesterday that Rosneft is also close to deals with Chinese and/or Indian oil and gas majors on its Russian assets. Reportedly starting with the planned sale of a 19 percent stake in the 3.8 billion-barrel Vankor oil field.

That comes after Rosneft last week announced the sale of a 23.8 percent interest in Vankor to a consortium of India companies including Oil India, Bharat PetroResources and Indian Oil for $2.1 billion. Which followed the sale of a 15 percent interest in the same field last month to India’s ONGC for $1.5 billion.

These moves come as Russia’s oil companies are reportedly seeing the current market as a good opportunity to monetize assets, and raise cash, with bidders apparently lining up globally. Related: Why China’s Energy Deregulation Is More Important Than The Aramco IPO

That suggests we could see more M&A deals coming here (for example, rumors are circulating that private Russian oil firm Russneft is also looking to sell a 10 percent stake to outside investors).

Watch for further announcements on deals in this surprising hotspot.

Here’s to Russia with love,

By Dave Forest

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