Russ Oil-Gas

MOSCOW, July 12 (RIA Novosti) - Gazprom [RTS: GAZP] has chosen French oil major Total SA as a partner in the first stage of developing the vast Shtokman natural gas field in the Barents Sea, the chief executive said. "Gazprom has decided on a foreign partner for the first stage of Shtokman's development - it is French company Total," Alexei Miller said. The agreement will be signed in Moscow on Friday. Miller said the first stage of the project off Russia's arctic coast aims to produce 23.7 billion cubic meters of natural gas annually by 2013, and to start production and delivery of liquefied natural gas in 2014. He said a new operating company will be set up to organize project funding, design, and construction, in which Gazprom will hold a 75% stake, and Total the remaining 25%. Gazprom could reduce its share in the future, offering other foreign partners an aggregate stake of 24%, ensuring that Gazprom retains at least 51%. Miller said Gazprom would retain full ownership of the license-holding company, therefore controlling the entire output. Total has not yet confirmed the deal announced by Miller; a company spokesman said negotiations are ongoing. The Shtokman field holds an estimated 3.2 trillion cubic meters of natural gas and 31 million metric tons of gas condensate in the Barents Sea, where Gazprom plans to build a liquefied natural gas plant. Some $12-14 billion will be invested in the project's first phase, and production will begin in 2011. The deposit is the only source of natural gas for the ambitious Nord Stream gas pipeline that will link Russia to Germany along the Baltic seabed. The decision to involve a foreign company comes in spite of the Russian energy giant's announcement last October that it would develop the Shtokman deposit on its own. The company had previously short-listed U.S. majors Chevron and ConocoPhillips, Norway's Statoil and Norsk Hydro and Total to develop the field. Gazprom previously said it would only attract partners with expertise in liquefying natural gas and development in "severe weather conditions" as contractors. U.S. oil major Chevron gave up its plans to join the Shtokman gas project in April.

Total delight at Shtokman win

12 July 2007 - Upstream OnLine - Russian gas monopoly Gazprom has picked French giant Total to become its partner in the giant Shtokman development, but said more partners may be invited to take part in the $20 billion project. The announcement marked the culmination of years of talks between Gazprom, Total and other hopefuls ConocoPhillips, Chevron, Statoil and Norsk Hydro. Gazprom and Total are expected to sign an accord in Moscow tomorrow. Total declined immediate comment on the news, which followed a telephone conversation between the Russian and French presidents Vladimir Putin and Nicolas Sarkozy. Statoil also declined comment. "We have ongoing dialogue with Gazprom. I can't really comment beyond that for now," Statoil spokesman Ola Morten Aanestad told Reuters. Gazprom boss Alexei Miller said in a statement Total would control 25% of a company that will own the infrastructure of the field, located in the Barents Sea. Other partners could later be granted 24%, while Gazprom would keep 51%, Miller said. The company would design the first phase of the project, finance it and build facilities, but would not own the licence for Shtokman as well as gas produced from it, which will be controlled by another full subsidiary of Gazprom. Meanwhile, an industry source told Reuters that Shtokman's first development phase will cost between $15 billion and $18 billion, meaning Total will have to commit between $3.75 billion and $4.5 billion to the project. "It's a bit of a different project to the one discussed in the past. The first phase will cost $15 billion to $18 billion and will produce 25 billion cubic metres (per year) at plateau," the source told Reuters. "Some 5% of this volume would be supplied to the Russian local market with the rest split equally between shipments to Europe and liquefied natural gas shipments to the US." "This is great news for Gazprom, as it has found a partner who agreed to share financial risks," Standard & Poors analyst Elena Anankina told Reuters. "But it is not clear what guarantees are there for Total to make the project interesting." Sergei Glazer from Vostok Nafta, a fund with $3.4 billion worth of Gazprom stock, said there was a clear reason for Total, which has often been viewed as an outsider, to join Shtokman. "One should not forget they have been sucessfully working with Gazprom in Iran for ages. Shtokman will secure them a foothold in the Russian Arctic. They will be the first foreign (company) in this hugely attractive area," he told Reuters. The US Geological Survey estimates 25% of the world's remaining hydrocarbon reserves lie above the Arctic circle. Last year Gazprom surprised the industry with an announcement that it had scrapped a year-long bidding process and would instead develop Shtokman on its own, a move many analysts linked to the cooling relations with Washington. It also said it had dropped a plan to liquefy gas for shipments to the US and was now looking to export at least half the gas by a new pipeline to Europe. However, talks continued with a view to having one or more foreign companies serving as an operating partner, although some companies including Chevron said they were not interested in being a mere contractor. Shtokman is one of the world's largest gas fields with reserves of over 3.7 trillion cubic metres. The first phase envisages production of 23.7 billion cubic metres per year and its export by a pipeline in 2013, while liquefied natural gas production will start in 2014.