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. Last Updated: 07/27/2016

Total to Get Reserves Under Shtokman Deal

APDe Margerie, left, shaking hands Friday in Moscow with Gazprom's Alexander Ananenkov, center, and Yury Komarov.
Total signed a long-awaited deal Friday to develop the giant Shtokman gas field with Gazprom that will allow it to book part of the Arctic field's lucrative reserves.

Total CEO Christophe de Margerie and Gazprom deputy CEO Alexander Ananenkov signed a 25-year deal to develop the first phase of Shtokman, a field set to supply huge amounts of gas to Europe and North America when it comes on line within the next decade.

Gazprom CEO Alexei Miller, who remains ill with a kidney ailment, did not attend the signing at Gazprom headquarters, but announced the surprise deal in a statement Thursday.

Total, which had been seeking entry into Shtokman for years, will take a 25 percent stake in the field's operating company. Gazprom has reserved the right to sell a further 24 percent to one or two of the companies still hoping to join the project, but will maintain a 51 percent controlling stake.

It will also hold full control of license holder Sevmorneftegaz and "be the owner of the whole amount of hydrocarbons to be extracted," Miller said in Thursday's statement.

Gazprom and Total provided further details of the deal on Friday, fulfilling analysts' predictions that the French firm would be allowed to book some of the field's reserves in exchange for the huge financial commitment and risk it would undertake during the project's difficult development.

"It's a technicality, but yes, we can book reserves," de Margerie said after the signing, news agencies reported. "In as far as we are taking risks, and when you take risks you can book reserves."

A Gazprom spokesman confirmed that Total would be able to book part of the field's estimated 3.7 trillion cubic meters of gas reserves, but said the exact amount had yet to be decided.

"Total will have a 25 percent stake, but it would be more accurate to say it will be able to book up to 25 percent of the reserves," the spokesman said, declining to be identified in line with company policy.

The details of the deal were still being worked out, he added.

Gazprom set up a special purpose vehicle in order to operate the field, allowing it to maintain 100 percent control over license holder Sevmorneftegaz. Sevmorneftegaz general director Yury Komarov also attended the signing.

The special purpose vehicle, which will organize the design, financing, construction and operation of Shtokman's first phase, will govern the project for 25 years, Total said in a statement after the signing of the framework agreement.

The agreement foresaw the start of "joint project implementation activities" in July 2007, the statement said, without providing further details.

Shtokman, located some 550 kilometers offshore and deep under the Barents Sea, is one the world's largest -- and most difficult -- gas fields.

Analysts had predicted that Gazprom would be forced to reverse its decision in October, when it halted talks on participation by foreign oil companies.

Gazprom insisted afterward that it would only bring in foreign firms as contractors, preventing them from booking reserves -- a key indicator for shareholders.

Norway's Statoil and Norsk Hydro, which are due to be merged Oct. 1, and U.S. firm ConocoPhillips remain in the running for the 24 percent stake that Gazprom could still dole out.

Charlie Rowton, a spokesman for ConocoPhillips, said the company remained interested in participating in the project. "We maintain a steady dialogue with Gazprom, but can provide no further detail," Rowton said in an e-mailed response.

A senior executive at one of the Norwegian firms told Reuters on condition of anonymity Friday that the merging group was optimistic that it could strike a deal.

Analysts say Gazprom's timeline for the project, of gas production by 2013 and LNG production by 2014, is ambitious.