Russian state-owned oil and gas producer Zarubezhneft has agreed to buy out compatriot Rosneft's shareholdings in two offshore exploration and development projects in Vietnam, along with a related offshore gas and condensate pipeline.

A Rosneft spokesperson told Russian news agency Interfax that Zarubezhneft is working on due diligence and related legal issues in order to complete the deal, which is expected to be closed by the end of June.

Sign up for our new energy transition newsletter

Gain valuable insight into the global oil and gas industry's energy transition from Accelerate, the new weekly newsletter from Upstream and Recharge. Sign up here

Rosneft and Zarubezhneft have not disclosed the financial terms of the agreement.

Rosneft, Russia's largest oil operator, holds a 35% operating stake in Vietnam's Block 06.1 via its wholly owned subsidiary, Rosneft Vietnam.

India’s ONGC Videsh holds a 45% stake in the block, with the remainder held by state-run PetroVietnam.

This block hosts three gas and condensate fields — Lan Do, Phong Lan Dai (Wild Orchid) and Lan Tay.

The three fields lie about 370 kilometres offshore in the Nam Con Son basin, in water depths of up to 190 metres. Initial gas reserves are estimated at about 69 billion cubic metres across the three fields.

According to Rosneft, the three assets produced about 3.2 Bcm of gas and some condensate in 2020.

Rosneft's other assets in Vietnam include a production sharing agreement to explore and develop Block 05.3/11, which lies near Block 06.1.

Although the PSA was signed in 2013, Rosneft has not reported any discoveries on the acreage, despite drilling several exploration wells.

Estimates of resources at the block point to 28 Bcm of gas and 130 million barrels of condensate.

Rosneft also holds a minority stake of about 33% in the Nam Con Son pipeline that carried gas and condensate from Block 06.1 and neighbouring producing tracts to shore.

The Russian giant's partners in this project are Petrovietnam, with a 51% interest, and France-based Perenco with a 16% stake.

According to Rosneft, the pipeline transported about 5.6 Bcm of gas last year, below its nameplate annual capacity of 7.7 Bcm.

Rosneft’s decision to sell its shareholdings in Vietnam are in line with changes in its long-term strategy. These involve focusing on large and capital-intensive greenfields in Russia, and selling minor and depleted assets with a high cost base and unclear returns.

Rosneft entered Vietnam several years ago, following its takeover of Russo-British oil venture TNK-BP in 2013.

Zarubezhneft has shareholdings in several offshore developments in the country via Vietsovpetro which is its joint venture with PetroVietnam.