Total to buy stake in Novatek for $4 billion

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, Mar. 3 -- Total SA announced plans to buy a 12% stake in OAO Novatek, Russia’s largest independent gas producer, for $4 billion with plans to boost Total’s stake to 19.4% in 3 years. Total also plans to acquire 20% interest in Novatek’s northwestern Siberian Yamal LNG project.

The Total-Novatek transaction comes after BP PLC and OAO Rosneft agreed to form a strategic global alliance that includes a stock swap, an Arctic offshore exploration joint venture and research effort, and a refining partnership (OGJ Online, Jan. 17, 2011).

Rosneft and BP plan to form a joint operating company in the next 2 years with a 66.67% and 33.33% participation, respectively.

Total expects to close on its 12% stake in Novatek by April and then plans to appoint a representative to Novatek’s board. Through this acquisition, Total will gain access to equity production of 120,000 boe/d and to estimated proved and probable reserves of 1 billion boe.

Terms call for Total’s overall holdings in Novatek to increase to 15% within 12 months and to 19.4% within 36 months. Novatek’s 2010 production was 750,000 boe/d, including condensates. Total and Novatek already jointly develop Termokarstovoye field through the Terneftegaz joint venture (OGJ Online, June 25, 2009).

Closing on the Yamal LNG partnership is expected by July, Total said. The Yamal LNG project envisions production, treatment, transportation, liquefaction, and shipping of natural gas and NGLs from South Tambey field on the Yamal Peninsula (OGJ, May 10, 2010, Newsletter).

Total lists South Tambey resources at 44 tcf of gas, allowing production of more than 15 million tonnes/year of LNG. After Total acquires its 20%, Novatek will hold 51% of the Yamal LNG project.

Christophe de Margerie, Total chairman and chief executive officer, said, “This agreement adds to the close cooperation built with Gazprom since 2007 on the Shotkman project.” Last year Gazprom announced it expects a 3-year gas production delay to 2016 from Shtokman (OGJ Online, Feb. 8, 2010).

De Margerie met with Russia’s President Dmitry Medvedev in Moscow on Mar. 2. They discussed Total’s activities in Russia. De Margerie signed the Total-Novatek agreement later than same day in the presence of Prime Minister Vladimir Putin.

Total expects to become the first international investor to participate in the Yamal LNG project. Total has done business since 1989 in Russia where it operates Kharyaga field with a 40% interest.

Contact Paula Dittrick at paulad@ogjonline.com.



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