Total to Book 25% of Shtokman After Signing Gazprom Agreement
Since Total has a 25 percent stake in the operating company and is sharing the risks, the company will be able to book 25 percent of the reserves, CEO Christophe de Margerie told reporters in Moscow today.
Gazprom, the world's largest natural-gas producer, yesterday announced Total's participation in the $20 billion offshore field project, which has enough gas to supply Europe for more than three years.
Via: Bloomberg
After five years of negotiations, Gazprom has chosen a foreign partner for the development of the Shtokman gas field, one of the world's largest. The French company Total beat out competition from America and Norway to receive a blocking share in the company operating the project. This is Total's first serious acquisition in Russia, a country in which the company has been plagued by misfortune for the last several years. Experts in the field attribute Total's success to a sharp upswing in relations between Russia and France in the wake of Nicolas Sarkozy's victory in the French presidential elections in May.
Yesterday the Russian gas giant Gazprom announced that it has chosen the French company Total as its partner in the development of the Shtokman gas field in the Barents Sea. The field contains gas deposits totaling 3.7 trillion cubic meters. According to Gazprom CEO Alexei Miller, Total will receive a 25% stake in a "special-purpose company that will ultimately assume ownership of the first-phase infrastructure" for the development of the Shtokman field. Gazprom emphasizes, however, that it will retain the license for the exploitation of the field and "the entire volume of extracted hydrocarbons." Yesterday Gazprom declined to elaborate on the ways that Total stands to benefit from participation in the project, saying only that it will comment on the details of the partnership after the signing of an agreement between the two companies. Total president Christophe de Margerie and Gazprom deputy chairman Alexander Ananenkov are due to sign the document today. A spokesperson for Total confirmed that the agreement will be signed today but refused to comment further.
Interfax news agency quoted an anonymous Gazprom representative as saying that Total will profit from the sale of Shtokman gas by the operating company to Gazprom. Neither Gazprom itself nor Total specified the price that the company operating the field will charge Gazprom for the gas. Gazprom is employing a similar scheme in its development of the Urengoi field together with the German company Wintershall (the two companies co-own the operating company Achimgaz): in the case of the Urengoi field, three-fourths of the gas extracted is sold for the Russian price, and the remaining one-fourth is sold for the export price minus transportation costs. The proceeds are split between the shareholders in proportion to the sizes of their shares. Even if the Shtokman project is organized along similar lines, however, it is still too early to calculate the profits that the operating company can expect to reap, since the costs of extracting and transporting the gas are not yet known.
In fact, the two companies themselves may not even know, particularly since the choice of Total as Gazprom's Shtokman partner appears to have been made more or less on the spur of the moment. The Russian president's press service reported that Vladimir Putin spoke by telephone with his French counterpart, Nicolas Sarkozy, and that the two presidents discussed the "fuel and energy sphere." In France, the largest representative of this field is the company Total, which has been plagued by a series of misfortunes in Russia over the last several years. Until recently, Total was working on only a single project in Russia: the development of the Kharyaga field in a production sharing agreement. In 2005, the company wanted to acquire a blocking share in the independent gas producer NOVATEK, but it was turned down by the Federal Antimonopoly Service. Total's joint project with Rosneft on the development of the Black Sea shelf also came to naught, and even its Kharyaga project was the target of constant criticism from Russian officials.
The situation began to change after Nicolas Sarkozy became the president of France on May 5. The fact of the matter is that over the last year, Vladimir Putin has lost almost all of his European friends, and out of the new generation of European leaders Mr. Sarkozy is the most convenient partner for Mr. Putin. "After the elections in France, many people thought that relations between Russia and France would deteriorate," said Jacques Sapir, the director of the Higher School of Social Sciences in Paris. "However, the first meeting between Nicolas Sarkozy and Vladimir Putin at the G8 summit in Heiligendamm demonstrated that this is not at all the case. It turns out that the presidents got along and were able to quickly find a common language. Both Vladimir Putin and Nicolas Sarkozy are pragmatists who are not burdened by any particular ideology. Russia is very interested in having contacts with France, which is important, and there is no bad blood between the presidents, which is no less important." At the moment, having France as a reliable ally that can beat back attacks from within the European Union is extremely beneficial for Russia. Previously this role was played by German chancellor Gerhard Schroeder and Italian prime minister Silvio Berlusconi, and now it is Nicolas Sarkozy who looks set to become Russia's intercessor.
On the eve of the G8 summit, Rosneft president Sergei Bogdanchikov said from Paris that his company intends to develop its cooperation with Total. Significantly, the head of the Russian government-run oil company had never made such advances to any foreign company before. The Russian Ministry of Industry and Energy has approved the budget increase for the Kharyaga project by 12%, to $164 million, but the increase has to be approved by the government, and earlier officials government officials had been categorically opposed to the idea. Finally, after the telephone conversation between the two presidents, Total, which was never considered one of the leading bidders for the Shtokman contract, was awarded a blocking share and became the leading foreign partner in the project. Gazprom has reserved the right to sign up one or more additional participants, but only 24% of shares in the operating company remain for them. "We hope that the foreign investment community will appropriately appreciate this step," said the Ministry of Industry and Energy in a comment about the deal between Gazprom and Total.
In addition to Total, the Norwegian companies Statoil and Hydro (their ongoing merger is due to be finalized this year) and the American company ConocoPhillips were also bidding for a share in the Shtokman project.
Yesterday representatives of each company said that they are still interested in investing in the project and are discussing the matter with Gazprom. In any case, the main question that concerns the foreign contenders for Shtokman – whether they will be able to count the field's reserves as their own – remains unanswered. Earlier, sources inside Gazprom had told Kommersant that such a possibility exists, but not a single one of the experts interviewed by this newspaper could explain how that could be done if the license remains in Gazprom's hands. According to Boris Aronshtein, a member of the board of directors of Neftegazkonsalt (one of the participants in which is the consulting company Miller & Lents), given the current absence of international-grade extraction infrastructure at the field, Shtokman's reserves can be counted only as conditional resources. In addition, he says that if a company does not own the license, it cannot count the reserves as its own.
The History of Shtokman
The Shtokman gas condensate field, which was discovered in 1988, is located in the Barents Sea, 600 km northeast of Murmansk. The depth of the sea in the area is 320-340 m. The field's reserves are estimated at 3.7 trillion cubic meters of gas and more than 31 million tons of gas condensate. The first stage of exploitation of the field is expected to be the construction of a plant for the production of liquefied national gas in Leningrad Oblast and a pipeline to carry gas to the plant. The planned annual extraction volume at the first stage is 22.5 billion cubic meters of gas and 205,000 tons of condensate. These numbers will then be raised to 70 billion cubic meters of gas and 0.6 million tons of condensate per year. Gas is expected to begin flowing in 2013, and condensate in 2014. Investment at the first stage is estimated to be $12-14 billion.
In 2002, Gazprom and Rosneft created the company Sevmorneftegaz for the exploitation of the field, while simultaneously beginning talks with foreign companies interested in participating in the project. In 2004-2005, nine memorandums were signed with large energy companies that had presented proposals for the joint development of the field. In December 2004, Rosneft sold its share in Sevmorneftegaz to Gazprom in order to raise $1.7 billion to acquire Yuganskneftegaz.
On September 16, 2005, Gazprom announced a shortlist of partners who would be invited to participate in more detailed negotiations. This list included Statoil (Norway), Total (France), Chevron (US), Hydro (Norway), and ConocoPhillips (US). Gazprom promised to whittle its list down to two or three companies within six months. On October 9, 2006, however, Gazprom announced that no foreign companies would be allowed to participate in the project, since they could not offer sufficiently attractive assets in return for a share in Shtokman. In March 2007, negotiations with foreign companies were resumed under new conditions: they were offered a share in the company that will operate the field and own the project infrastructure but that will not own either the license or any of the gas.
Via: Kommersant
by Denis Rebrov, Mikhail Zygar, and Alek Akhundov
ogalaxia Tags: Total,Gazprom,Sarkozy
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