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Gazprom chooses Total for Shtokman first phase

Gazprom has chosen French oil major Total SA as a partner in the first stage of developing the vast Shtokman natural gas field in the Barents Sea, the chief executive said.

“Gazprom has decided on a foreign partner for the first stage of Shtokman's development - it is French company Total,” Alexei Miller said. The agreement will be signed in Moscow on Friday. Miller said the first stage of the project off Russia's arctic coast 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 will be set up to organize project funding, design, and construction, in which Gazprom will hold a 75% stake, and Total the remaining 25%. Gazprom could reduce its share in the future, offering other foreign partners an aggregate stake of 24%, ensuring that Gazprom retains at least 51%. Miller said Gazprom would retain full ownership of the license-holding company, therefore controlling the entire output. “We expect an agreement will be signed tomorrow,” a Total spokesman said Thursday, without giving further details.

The Shtokman field holds an estimated 3.2 trillion cubic meters of natural gas and 31 million metric tons of gas condensate in the Barents Sea, where Gazprom plans to build a liquefied natural gas plant. Some $12-14 billion will be invested in the project's first phase, and production will begin in 2011. The deposit is the only source of natural gas for the ambitious Nord Stream gas pipeline that will link Russia to Germany along the Baltic seabed.

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 US majors Chevron and ConocoPhillips, Norway's Statoil and Norsk Hydro and Total to develop the field. Gazprom previously said it would only attract partners with expertise in liquefying natural gas and development in “severe weather conditions” as contractors. US oil major Chevron gave up its plans to join the Shtokman gas project in April. (