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Total Looks for Big Stake in Yamal Gas Field

Gazprom head Alexei Miller, left, shaking hands with French Prime Minister Francois Fillon, right, as Prime Minister Vladimir Putin joins in. The men were visiting a Russian exhibition Friday in Paris. Alexei Nikolsky

Total is looking to win a major stake in the Yamal liquefied natural gas project, chief executive Christophe de Margerie said Friday, signaling unabated foreign appetite to invest in Russia despite a dip in the country's exports of the fuel.

The French oil and gas producer is seeking 20 percent to 25 percent in the plan to develop a large Yamal field, owned by private Russian gas producer Novatek, and to build a plant to liquefy the gas for shipment by tankers, de Margerie told reporters after meeting Prime Minister Vladimir Putin in Paris.

If the bid is successful, it would be Total's fourth investment in Russia's inhospitable Arctic — and a new show of confidence that demand and prices for LNG will rebound from the current lows. A Gazprom-led joint venture with Total and Norway's StatoilHydro recently pushed back their effort to tap the giant Shtokman field off Russia's Arctic coast.

Putin indicated that he would welcome Total's greater presence in the country.

“You have now been working with three Russian partners, and for a long time,” he told de Margerie at the start of their meeting. “And there's a chance to expand your operations in Russia.

“I won't speak about Shtokman now. The project is really grandiose, but there are others, for example gas liquefaction and just the production of hydrocarbons.”

Novatek owns 51 percent of Yamal LNG, the company that holds the license for the Yuzhno-Tambeiskoye field. The deposit has reserves of at least 1.2 trillion cubic meters of gas, or enough for Russia to export to Europe at last year's rate for nearly eight years.

Gazprom, Russia's gas export monopoly, has a 19 percent interest in Novatek, while Putin's longtime acquaintance Gennady Timchenko increased his Novatek stake to almost 21 percent in March.

De Margerie lauded Putin's support during the meeting, using language that raised questions about the Frenchman's take on President Dmitry Medvedev's authority.

“Our policy in your country, Mr. Prime Minister, is infinitely clear,” de Margerie said, according to a transcript of the meeting posted on the Cabinet's web site. “We may have many partners but one master, one boss. One, not two.

“Thus, as long as you support me and as long as you support Total, we will do good things.”

Russia has had two rulers since Medvedev won presidential elections in 2008 and vowed to govern the country in tandem with Putin.
Total spokeswoman Penelope Semavoine was in a meeting and unavailable for comment Monday afternoon. Putin's spokesman, Dmitry Peskov, referred an inquiry about how people should interpret the statement to de Margerie.

“It doesn't appear to be the main thing” about the meeting, Peskov said.

Qatar Petroleum may join Yamal LNG as another foreign partner, de Margerie said after he passed a message from the company to Putin during their closed-door talks. The message from the government of Qatar, the world's largest LNG exporter, said the country wanted in on the project. Putin said he was “totally in favor” of the proposal, de Margerie said, Reuters reported.

Peskov said the government would not comment on any commercially sensitive talks. A phone call to Novatek's press service went unanswered Monday evening, as most businesses were closed for a state holiday.

Neither Novatek nor Total identified the price tag for Yamal LNG. Energy industry consultants Wood Mackenzie said the costs would soar and that the prospects of any work on the field were too distant to put a concrete figure on the outlays.

“We judge it to be a relatively speculative development at this time,” said Frank Harris, head of global LNG consulting at the firm. “However, in summary we would expect it to be a challenging and expensive development given its physical location and the nature of the environment in the Yamal Peninsula.”

A key issue will be the project's ability to recoup costs after shale gas production surged in the United States last year, putting downward pressure on conventional gas, he said, adding that the drop in prices caused the Shtokman delay.

This could also potentially take a toll on Yamal if Gazprom and its potential partners are unable to market the output in the United States, Harris said.

“Yamal is … a lot of LNG to find a home for in the European market, particularly as the economics of supplying the gas into Europe via pipeline could be more attractive than via LNG,” he said. “That said, a number of very capable LNG players are showing interest in the project, indicating that they clearly believe a commercial solution is workable.”

De Margerie told Putin at the start of their meeting that he wanted no more delays on Shtokman.

“We will possibly need your help … to put pressure on all the project's partners,” he said.

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