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. Last Updated: 07/27/2016

Novatek IPO Would Scare Off Total

PARIS -- Total, Europe's third-largest oil company, will cancel plans to buy 25 percent of Novatek if the Russian natural gas producer offers shares to the public, a failure that would threaten Total's output growth targets.

Total agreed in September to buy 25 percent of Novatek, Russia's second-largest natural gas producer, for more than $900 million.

Novatek this year announced plans to seek a higher price or lower stake for the sale to Total and said it would sell shares to the public.

The company declined to comment on Wednesday.

"If there are no shares to buy, then we will not buy the shares; what more can I tell you?" Christophe de Margerie, head of exploration and production at Total, said Wednesday in Paris at a conference organized by the Energy Exchange.

"We have no right to tell them what to do -- we're not a shareholder."

Total has been banking on the Novatek purchase to help revive output growth after first-quarter production fell 3 percent.

The acquisition could help Total catch up with rivals such as BP, who are investing in Russia to offset declining production from British fields.

Novatek's gas reserves of 1.5 trillion cubic meters are one-twelfth of those of larger Russian competitor Gazprom.

Novatek will not comment on negotiations with Total, spokesman Mikhail Lozovoi said Wednesday in a telephone interview from Moscow.

Novatek last week got permission from the Federal Service for Financial Markets to have 20 percent of its shares trade as depositary receipts.

The company in March said it could sell more shares to the public on the foreign exchange in June.

The number of shares offered would depend on whether Russia's Federal Anti-Monopoly Service approves Total's purchase, chief financial officer Mark Gyetvay said at that time.

The service may decide whether to approve Total's purchase this month, Yelena Nagaichuk, deputy head of the press service, said Wednesday in a telephone interview from Moscow.

"It's most likely" that there will be a decision by the end of June, "but it's not a strict schedule," Nagaichuk said.

Total, which aims to boost production by about 4 percent per year through 2010, said that output had fallen to 2.56 million barrels of oil equivalent per day in the first quarter of 2005.

Without an investment in Novatek, Total expects annual production growth to slow to between 3 percent and 4 percent through 2010, down from earlier projections of 4 percent, Robert Castaigne, Total's chief financial officer, said May 4 in a conference call with reporters.