ukraine, page-2

Linc Energy braves Arctic with Abramovich
PUBLISHED: 6 hours 47 MINUTES AGO | UPDATE: 0 hour 10 MINUTES AGO
Sally Rose

A new partnership with a brash oligarch presents big opportunities for an emerging Queensland company in Russia. In November, Russian billionaire and Chelsea Football Club owner Roman Abramovich touched down in his private jet to inspect Linc Energy’s underground coal gasification demonstration facility in Chinchilla, Queensland. Since then, Linc Energy and one of the tycoon’s companies, LLC YakutMinerals, have signed an accord. A feasibility study is now under way with a view to a joint venture in remotest Arctic Russia.

Perched on a peninsula at the country’s north-east tip, the Chukotka region lies across the Bering Strait from Alaska. Linc Energy’s chief financial officer Stuart Jones is charged with risk management of the study and potential project from the company headquarters in Brisbane. He has no plans to visit to Russia: it is sufficient that Linc Energy’s founder, chief executive Peter Bond and other members of the management team have visited the site and nearby administrative centre, Anadyr, bringing back the information Jones needs.

“The operating environment in Russia will be supportive of the project out of necessity,” says Jones. Despite Russia being a major gas producer, the relative weakness of the ruble means it is far more profitable to export than reserve for domestic consumption. But Jones says: “Like many governments around the world Chukotka’s administration is focused on securing energy supply from within their own region.”

Supply shortages in Chukotka are much greater than the rest of the country because it is not connected to the national gas distribution network. And Chukotka’s underground coal deposits are geologically stranded, meaning traditional coal mining techniques are not economically viable.

Abramovich was governor of the autonomous okrug (region) for 14 years and has business interests there. He approached Linc Energy with an interest in deploying its technologies for underground coal seam gas extraction and the conversion of gas into liquid fuels. Because this type of mining has not been used there, a new regulatory framework will need to be developed before a licence can be granted. The project will also need the support of the local community to go ahead. Having a well connected local business partner is critical to success, Jones says.

Linc Energy could not have found a better connected individual. Abramovich’s rise to the top of Russian society has not been without controversy. The tycoon made his fortune through oil export deals in the 1990s as the economy was opening up. “All partners have been keen to offset any perceptions that Russia is beset by corruption,” Jones says. In April, Bloomberg named Abramovich Russia’s most charitable billionaire. He has donated $335 million over the past three years, with $110 million of that spent on social infrastructure investments in Chukotka.

http://www.afr.com/f/free/markets/capital/cfo/linc_energy_braves_arctic_with_abramovich_w79H2BgSkyuSHnQZhRDGAK