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25 Jun, 2009 05:59

Total signs up for Yamal gas project

Europe's largest refiner, Total, will help develop a gas field in Russia's Arctic, and build a liquified gas plant. It will also buy a 49% stake in a subsidiary of Russia's independent gas producer Novatek.

Foreign investors are welcome in Russia’s sensitive industrial sectors such as energy, says Vladimir Putin. He supported the involvement of French energy group Total in developing the Termokarstovoe gas field together with Russia’s Novatek.

“This is a field of strategic importance for Russia. We've pointed out several times that we invite foreign partners to develop fields – even ones like this. But this requires the decision of a government commission. If Total starts investing now we will definitely take it into account.”

To explore the gas field, Total and Novatek will invest up to $1 billion. Under the joint venture, the two companies will also build a liquefied gas plant on the Yamal peninsula. Russia has toughened working conditions for international firms who want to develop its reserves, but that doesn’t seem to be an obstacle for Total, according to CEO Christophe De Margerie.

“I personally don’t think that it’s hard to work in Russia. We have to learn how to work effectively with Gazprom, with our partners in Novatek.”

Gazprom Deputy Chairman, Aleksandr Medvedev, says that under current legislation all gas volumes produced at this field will be sold by Gazprom.

“The law of a single export channel remains in force. If this project comes on stream the owner of the gas, as in the Shtockman project, will be Gazprom. Under what conditions? Well it will depend on the business model.”

Total will get its share of revenues depending on its investment in the project. The Termokarstovoe gas field has proven reserves of 24 billion cubic meters. Even at an average price of $280 per thousand cubic meters, Total’s participation in the joint venture could earn it billions of dollars.

The deal came as a surprise for many, with Repsol and Shell among those interested in the project. Shell Russia President, Chris Finlayson, says it will continue talks to join the project.

“We remain interested in the project. Our CEO Mr Van der Veer met with Alexei Miller of Gazprom only two weeks ago to discuss how to move the project forward, and Mr Van der Veer will also be in Moscow next week and expects to meet with Prime Minister Putin at that time as well.”