--Rosneft, Statoil sign a potential $100 billion deal to develop fields in Russia's Arctic
--Statoil deal structured similarly to Rosneft deals with Exxon, Eni
--Statoil will have 33.33% stake in JV with Rosneft
--- Deals follow Russia's tax breaks for offshore fields
(Adds details on the deal, background, TNK-BP's, BP's interest in Arctic)
Norway's Statoil ASA (STO, STL.OS) signed Saturday a potential $100 billion cooperation agreement with Russian state oil company Rosneft (>> Rosneft' NK OAO) to develop Russia's mostly untapped offshore energy resources in the Arctic.
Statoil joined Exxon Mobil Corp. (>> Exxon Mobil Corporation) and Italy's Eni SpA (E, ENI.MI), which signed similar deals earlier 2011, in a so-called "scramble for the Russian Arctic" following Russia's approval of long-awaited tax breaks for the potentially rich offshore fields.
Russia faces declining oil production from its traditional oil regions and is eager to attract Western energy companies with money and expertise to develop the Arctic shelf. The move to open the Arctic shelf to foreign investors received support from Russian President-elect Vladimir Putin, who was at the signing ceremonies.
People familiar with the matter said that Russia's energy czar, Deputy Prime Minister Igor Sechin--who isn't expected to join the new Russian government to be announced in the coming days--had a prominent role in securing all three agreements.
Statoil's deal is structured similarly to those signed by Exxon and Eni with Rosneft. Statoil will set up joint ventures with its Russian partner to develop fields in the Barents Sea and Sea of Okhotsk, holding 33.33% in each. Statoil is to pay all costs for exploration, in addition to some historic costs and possible bonuses to the Russian company. The agreement also envisages Rosneft's participation in Statoil projects in Norway's offshore zones.
"Partnership between Rosneft and Statoil will contribute significantly to the development of economic relations between Russia and Norway, signifying a new era of unprecedented levels of trust," said Rosneft President Eduard Khudainatov. The deal followed the final demarcation of the sea border between Russia and Norway in 2011.
"We aim for early access at scale in new and promising basins, positioning us for high-impact exploration. This agreement is at the core of our strategy, supporting our long-term growth ambitions," said Helge Lund, chief executive of Statoil, in a statement.
The companies will jointly explore the Perseevsky license in the Russian part of the Central Barents Sea and three licenses--the Kashevarovsky, Lisyansky and Magadan-1--north of Sakhalin island in the Sea of Okhotsk. The four offshore licenses cover an area of more than 100,000 square kilometers and may demand an investment of between $65 billion to $100 billion dollars over decades.
Statoil is not new to Russia, being one of the first Western oil majors to open an office in Moscow after the collapse of communism. Until recently, however, it has failed to secure any big deal in the country. Statoil is part of an international consortium, together with Total SA (TOT, FP.FR) and Gazprom (OGZPY, GAZP.RS), to develop the Shtokman liquefied natural gas project off the Russian Arctic Circle, but the project has suffered a number of delays on the investment decision.
Together with Russia's second-largest oil company, Lukoil Holdings (LUKOY, LKOH.RS), Statoil is developing the West Qurna-2 field in Iraq but is planning to sell its stake to the partner.
"The deal has been discussed for some time, and it's really good that it's finally done," Troika Dialog analyst Valery Nesterov said, adding that the fields "are not at all bad for exploration"
"It's a sign that Russia is eager to intensify exploration at the Arctic shelf, and is trying to minimize risks by diversifying the partners," he added.
Another Western player, BP PLC (BP) said Saturday it is also interested in participating in Arctic projects in Russia. The company may only invest in Russia through its 50-50 joint venture with a group of local billionaires, TNK-BP Holding's (>> TNK-BP Holding OAO), in order to avoid violating a shareholders' agreement following a London court's decision. Last year BP's Russian partners forced the company to give up an Arctic exploration project and share-swap deal with Rosneft.
Chris Einchcomb, TNK-BP's senior vice president of exploration and appraisal, said Saturday the company responded positively to Rosneft's invitation to participate in the Arctic projects. "We look forward to starting working group meetings with Rosneft in the nearest future," he said, adding that the company is able to bring in BP's and its own offshore experience.
A BP spokesman said the company has yet to be presented with TNK-BP plans for activities in the Arctic, and "it will be premature to comment on these specific developments." Lukoil has also expressed interest in partnering with Rosneft on the shelf.
Troika's Nesterov said with more Arctic deals being signed with foreign companies, fewer fields remain for private Russian companies.
-By Alexander Kolyandr, Dow Jones Newswires; +7 495 232-9192 [email protected]