Russ Oil-Gas

MOSCOW, July 13 (RIA Novosti) - The cost of the first project phase to develop the vast Shtokman natural gas deposit off Russia's Arctic coast has been estimated at $15 billion, a Gazprom [RTS: GAZP] top manager said Friday. "In preliminary estimates, the first phase of the project will cost $15 billion," the deputy chairman of the energy giant's management committee, Alexander Medvedev, said. Gazprom and French oil major Total signed an agreement Friday on cooperation in developing the Shtokman field in the Barents Sea, which holds an estimated 3.7 trillion cubic meters of natural gas and 31 million metric tons of gas condensate. Gazprom CEO Alexei Miller said earlier that the first stage of the project 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 - a special purpose vehicle (SPV) - would be set up to organize project funding, design, and construction. Gazprom will hold 75% in the SPV, while Total will receive the remaining 25%. Gazprom could reduce its stake in the future, offering other foreign partners an aggregate interest of 24%, ensuring that Gazprom retains at least 51%. Gazprom's deputy head, Alexander Ananenkov, said Friday that the new company would be formed in the very near future, but that the project would go ahead even before it is up and running. Gazprom is set to retain full ownership of the license-holding company, therefore controlling the entire output. The deposit is the only source of natural gas for the ambitious Nord Stream gas pipeline that will run under the Baltic Sea from Russia to Germany. 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.

Total signs on Shtokman dotted line

13 July 2007 - Upstream OnLine - Russian gas giant Gazprom and Total have signed a 25-year deal to develop phase one of the giant Shtokman gas field, with the French giant saying it expects a decision on investment in the project in 2009. "A final investment decision should be signed in 2009," said a spokeswoman at Total, adding that feasibility studies will begin as soon as this month.. After the signing ceremony, held in Moscow, Total boss Christophe de Margerie said the French giant would be able to book reserves from Shtokman. "It's a technicality, but yes, we will be able to book reserves," Reuters quoted de Margerie as saying. Gazprom said yesterday that Total had agreed in principle to take a 25% stake in Sevmorneftegaz, the operating company that will develop Shtokman and own its infrastructure. Upon completion of phase 1, Total will transfer its share to Gazprom. Total said last night the deal commits it only to a study phase, but not to any investments. But Gazprom will retain the licence for the field, and be sole owner of the gas produced. The agreement provides for the possibility for other foreign partners to join the project, taking up to a 24% stake at the expense of the Gazprom’s share. This morning Gazprom's acting chief executive, Alexander Ananenkov, said other potential partners needed to better their offers to land a stake in the development. Norways's Statoil and Norsk Hydro, and US supermajor ConocoPhillips have been in talks to join the project. "The further development of Shtokman - I mean phases 2, 3 and 4 - Gazprom will develop on its own," he added. Work will start as early as this month on the field, which lies above the Arctic Circle, in the Barents Sea, in order to meet a deadline to start production in 2013 and thus avoid a slump in Russian gas output, the companies said in a joint statement.