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. Last Updated: 07/27/2016

Shtokmann Gas Field Draws Banking Bids

Four foreign banking groups have submitted bids for the lucrative consulting contracts in the $5-billion development of the Shtokmann gas field, an official of the company that owns the rights said Monday.


Vyacheslav Kuznetsov, secretary of the supervisory committee of Rosshelf, a Russian company that was awarded the rights to the field last November, said that Rosshelf would announce a winner in the next few weeks from the list of four foreign investment banks.


Kuznetsov said the contenders for the financial advice contracts include three American investment banks, Morgan Stanley, Morgan Grenfell and Goldmann Sachs and an international consortium, the Narodny Finansovy Consortium.


The banks are applying for a piece of the huge commission income that will flow from putting together a package to finance the development of the project.


The Shtokmann field, located in the Barents Sea north of Russia, is a rich prize with estimated reserves of 3 trillion tons of gas, four times Russia's annual gas production.


If the deal proceeds, it will be the biggest mineral development undertaken by a private Russian company and will bring Russia thousands of jobs and billions of dollars in foreign exchange earnings.


The Rosshelf consortium was handed the rights to the field in a surprise decision last November by then Energy Minister Viktor Chernomyrdin that favored the Russian group ahead of a foreign consortium headed by U. S. firm Conoco Overseas Oil and Norwegian Norsk Hydro.


Two weeks ago the consortium received its official mining licenses, though it has not yet completed its final feasibility study.


Kuznetsov said that one of the bidders, the Narodny Finansovy Consortium, would likely include the Arter Group, a private Russian company led by the young entrepreneur Andrei Chigiyevsky, who last December won the rights to the Udokan copper deposit in eastern Siberia.


Kuznetsov added that the Narodny consortium's bid appeared, at first look, appealing because it backed up its offer with its own money, whereas the other contenders had only applied on a commission for service basis.


The Narodny consortium would also involve the accounting firm Ernst & Young Vneshconsult which is also Rosshelf's main adviser on the project.


Alexander Rubtsyov, a partner at Ernst & Young, said that the firm wanted to avoid any conflict of interest which might arise between its role as an adviser and as a member of an investment consortium.


Rosshelf's shareholders include Gazprom, the Russian state gas concern, and key Russian military producers now struggling to convert to civilian production, among them Sevmash, a nuclear submarine factory.


The Narodny Finansovy Consortium is composed of the U. S. Bankers Trust; Charterhouse of Britain; Germany's biggest private bank, BHF; the French Credit Commercial de France; and a U. S. management company, Lareine.