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. Last Updated: 07/27/2016

Timan-Pechora Agrees To Cede 20% of Project

Members of the international oil consortium that makes up the Timan-Pechora project have agreed to concede a 20 percent stake to a Russian investor, oil officials said Thursday.

The $40 billion project -- including the Western oil companies Texaco, Exxon, Amoco and Norsk Hydro -- aims to extract some 400 million tons of oil from fields in Russia's far North region over 10 to 12 years.

Negotiations over the project hit a snag last December after a local oil exploration company Arkhangelskgeologiya -- a subsidiary of the state-run oil giant Rosneft -- demanded a 50 percent stake in the venture. In the latest development, however, a compromise solution appears to have been reached.

"Under the pressure of the Russian party, the Timan-Pechora Company has yielded the 20 percent to a Russian investor, presumably Rosneft," said Mikhail Alimov, a spokesman for Rosneft.

He added that the agreement only exists in a verbal form. LUKoil and Yukos were being considered as possible partners in the venture, he said.

But Alimov added that a large question mark still remains over the Russian side's ability to contribute to the project's financing.

If the document is finalized, Rosneft will have to contribute $800 million within seven years, he said.

"The question of financing is a problematic one," he said. "But we shall think it over. We lay hopes on a production-sharing agreement."

If the contract is signed in its present form, Texaco and Exxon will have to cut their stakes to 24 percent from their present 30 percent shares, while Amoco and Norsk Hydro will get 16 percent each instead of 20 percent, said Richard Ames, an expert with Amoco representation in Moscow.

However, Ames said Amoco "feels confident" about a Russian company's participation.

The project will create jobs for about 10,000 drilling and transportation workers, who, with their families, represent roughly 20 percent of the region's population, Deputy Fuel and Energy Minister Vadim Dvurechensky told the industry publication Russian Petroleum Investor.