Zarubezhneft to buy 20% of Kharyaga PSA from Total, to become project operator
MOSCOW. Jan 21 (Interfax) - France's Total has signed a deal to sell a 20% stake in the Kharyaga project, which is being carried out under a production sharing agreement (PSA), to Russia's Zarubezhneft, the Russian company said in a statement.
Zarubezhneft will also receive project operatorship.
The deal will leave Total with 20% of the project and increase Zarubezhneft's stake to 40%. Statoil owns 30% and Nenets Oil Company owns 10%.
Amendments to the Kharyaga PSA are subject to the approval of the Russian authorities.
Zarubezhneft will pay for the Total stake out of internal cash resources, a company representative told Interfax.
"The deal will be closed once all the clearances are received from the state bodies, which might take several months," the representative said.
Implementation of the agreement between Total and Zarubezhneft will require the Energy Ministry to initiate the signing of supplements to the PSA, the ministry said in a statement. That will in turn require approval by the government. The issues of transferring property, technologies and contract obligations will be resolved in the context of an Energy Ministry working group.
Total Exploration & Production President Arnaud Breuillac said the signing of the agreement represents a new stage in the life of Kharyaga. "A more substantial role for Zarubezhneft alongside our continued involvement will allow us to extract maximum value from Kharyaga for many years to come," Breuillac said.
"The deal is of interest to Zarubezhneft given our existing participation in Kharyaga, a field we know very well," Zarubezhneft General Director Sergei Kudryashov is quoted in the statement as saying.
"Our strategy focuses on the development of fields with difficult reservoirs. Since 2008, our company has been developing fields of similar geological structure under the Rusvietpetro joint venture in the Nenets Autonomous Okrug, located some 100 kilometers from the Kharyaga field. We plan to increase cost efficiency at Kharyaga by leveraging this experience and extracting synergies, thereby creating additional value for the project stakeholders and the Russian Federation. This is also a step towards closer cooperation in other projects with our longstanding partner Total," Kudryashov said.
"The project is technically challenging, with complex geology, heterogeneous carbonate reservoirs, waxy oil and a high content of H2S in associated gas," the statement says.
The Kharyaga project is now in the latter stage of development. Its geology proved to be more difficult and its reserves smaller than initially forecast. Additional exploration resulted in reserves being reduced to 29 million tonnes from 125 million tonnes previously, and Total reduced the forecast production plateau to 1.5 million tonnes of oil a year from 3 million tonnes, and said it would take longer to reach that plateau. Further drilling faces significant geological risks, according to the latest technical documents. Drilling will have to be conducted at edge zones and in low-productivity zones. Moreover, the issue of utilizing associated petroleum gas at the field remains unresolved.
Zarubezhneft, which is developing fields in the Central Khorei Ver uplift adjacent to Kharyaga, also ran into problems with challenging geology. However, it succeeded in stabilizing production at 3 million tonnes a year.
Total had asked Zarubezhneft to bring in its specialists and take over the operatorship at Kharyaga, where joint use of Central Khorei Ver infrastructure and facilities will lower project operating costs.
