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Chevron to Get 33% Stake in Black Sea Project With Rosneft

Chevron will take a roughly 30 percent stake in its Black Sea oil venture with Russia's largest oil producer, Rosneft, industry sources said Wednesday.

"The ownership structure will be around one-third Chevron, two-thirds Rosneft," said a source familiar with the details of project.

Last month, Chevron and Rosneft signed an agreement to jointly explore and develop the Val Shatsky field on the Black Sea shelf, a deep-water region that analysts say presents major geological difficulties.

At the signing, Deputy Prime Minister Igor Sechin said initial exploration investment, to be financed by Chevron, would amount to $1 billion.

A source who has seen the agreement papers, however, said the figure was likely to be lower.

The U.S. company was not immediately available for comment.

Another source in the oil industry familiar with the terms of Rosneft's offer said that in his opinion a one-third equity stake in the holding company was not commensurate with the hefty investment outlays and the project's high risk level.

The license area of 8,600 square kilometers, in the eastern part of the Black Sea, has a maximum depth of 2,200 meters, which is considered difficult for deep-water drilling.

Other foreign oil companies looking to tap Russia's vast hydrocarbon resources have also had to make do with similar ownership structures for operations with Russian partners.

Rosneft gave China's Sinopec, for example, a 25.1 percent stake in its Sakhalin-3 project in the Far East.

Chevron's Chief Executive John Watson underscored the issue of speedy cost recovery with Prime Minister Vladimir Putin, who presided over the signing ceremony between the companies.

"It is a highly prospective area; it does have geological risks and high costs. We will need to work closely with the government to ensure that proper fiscal terms are in place to allow this project to develop rapidly," Watson said.

Oil industry profits are heavily taxed through the mineral extraction tax and the oil export duty, but firms operating difficult projects have in the past successfully lobbied for tax breaks.

In July 2009, the government scrapped the mineral extraction tax for Black Sea shelf deposits until production from the fields reaches 20 million tons, but the oil produced remains subject to the export duty.

Last December, the government lifted the export duty for oil extracted at 22 remote East Siberian fields whose operators have been burdened by high infrastructure development costs.

The export duty was reintroduced this month, albeit at a lower level than mature fields, but firms developing costly projects in other regions continue to lobby for similar breaks at offshore projects.

Sechin said that reducing the export duty for the Black Sea project had not yet been discussed.

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