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. Last Updated: 07/27/2016

TotalFina Pumps Crude At Far North PSA Site

France's TotalFina oil group has started pumping oil in the Far North Nenets autonomous region and intends to double output by year end, a company official said Thursday.

The Kharyaga oil field, which is being run under a production-sharing agreement, began producing about 5,400 barrels of oil a day at its sole well Saturday, said Sergei Mingareyev, a deputy representative of TotalFina in Moscow.

TotalFina plans to drill two more wells in order to hike its output to 10,000 bpd by January.

The company has secured a 120,000-ton export allocation for the fourth quarter and the oil will be shipped through the Latvian port of Ventspils, Mingareyev said.

Under the PSA project terms, the production team gets to keep 94 percent of all oil produced and the remaining 6 percent goes to the government as a royalty for use of subsoils.

The Kharyaga field is the second PSA project to start producing oil after the Sakhalin 2 project in the Far East.

TotalFina has already upgraded the capacity of the 146-kilometer Kharyaga-Usa pipeline operated by Komitek affiliate KPN to insure it can handle shipments of 10,000 bpd, Mingareyev said. But the company has agreed directly with Komitek to transship crude via the stretch for injection into the pipeline network of state export monopoly Transneft.

TotalFina secured final approval for its Kharyaga PSA project in February. To do so, however, TotalFina had to agree to transfer a 10 percent stake in the project to Nenets Oil Co., which is owned by Nenets regional authorities and is not required to invest in the project. Another 20 percent has been reserved for an as-yet undecided Russian oil company that will have to finance its participation in the oil-field development.

The Kharyaga oil field harbors about 420.7 million barrels of crude and is expected to require an investment of about $700 million to develop, Nenets region governor Vladimir Butov said.

That would mean that the Russian oil company joining the project would have to pay $140 million to finance its 20 percent share.

LUKoil has been tipped by industry analysts as the most likely candidate for the 20 percent stake. Mingareyev said that LUKoil has not yet discussed the matter with TotalFina.

Two oil companies in Nenets - Komitek and Polar Lights - pay annual taxes of 400 million rubles ($15.5 million) to the region, a sum that accounts for 70 percent of its budget, Butov said. The two companies produce 3.7 million tons of oil a year.

Butov said he hopes revenues from the TotalFina project will slash the region's budget deficit by a third. He did not say how big this was.