Gazprom chooses Total as partner for Shtokman

The Associated Press

OAO Gazprom of Russia will partner with France’s Total SA to develop the Shtokman gas field in the Barents Sea, the oil giant said July 12, a decision that should accelerate development of one of the world’s biggest and most challenging natural gas deposits.

Gazprom CEO Alexei Miller said Total will receive a 25 percent stake in an operating company that will plan, finance and build the first stage of the development project, and another foreign partner could be given a 24 percent stake in the future.

“The agreement that has been reached is the latest important step in developing mutually beneficial cooperation and partnership relations between Gazprom and the world’s biggest energy companies,” Miller said in a statement.

The announcement came days after Gazprom said it might soon offer foreigners an equity role in the Shtokman field after some indications last year that foreigners would only be hired as contractors.

Miller said that Gazprom would keep at least a controlling 51 percent stake in the company — in line with an unwritten government policy under which state energy companies maintain control of all strategic deposits.

He added that Gazprom would have 100 percent ownership of a separate company that has the actual license to the field. Miller said pipeline deliveries from the field would begin in 2013 and the project would produce its first liquefied natural gas in 2014. The first phase envisages annual production of 23.7 billion cubic meters of gas per year, he said, but it was not immediately clear how production would be split between pipeline gas and LNG.

With estimated reserves of 3.7 trillion cubic meters of gas, Shtokman could meet total North American demand for five years.

“It’s very positive — foreign partners will contribute the technology, accelerate the field’s development and help Gazprom to absorb costs,” said Yevgenia Dyshlyuk, oil and gas analyst with Uralsib bank in Moscow.

Dyshlyuk said the project may eventually cost as much as US$30 billion.

Deal could strengthen Gazprom’s position in France

“There is potential for growth and this partnership will help,” she said.

While Total representative Lisa Wyler said that negotiations were “continuing,” Miller said that an official agreement would be signed July 13 in Moscow.

OAO Gazprom had also been in talks on Shtokman with Norway‘s Statoil ASA and Norsk Hydro ASA, and U.S.-based ConocoPhillips.

But in October, it had suggested that foreign companies would only be welcome as hired contractors.

That announcement came amid cooling relations between Russia and the United States, in part over concerns that President Vladimir Putin was stripping away democratic reforms in Russia.

Because of Gazprom’s limited experience with liquefied natural gas, coupled with the harsh environmental conditions at Shtokman, experts believed that technology and foreign expertise are key to exploiting the field.