11 Jan 2010 14:11

Zarubezhneft joins Kharyaga project

MOSCOW. Jan 11 (Interfax) - Russian state-owned oil company Zarubezhneft joined the project to develop the Kharyaga field in Nenets autonomous district on January 1, 2010.

French Total is the operator of the production-sharing project to develop Kharyaga. Norwegian StatoilHydro and Nenets Oil Company are the other members of the consortium.

The production-sharing agreement (PSA) gives Russia an option on a 20% stake in the project. Lukoil was to have received the stake, but the Russian oil major pulled out after determining that project profitability was too low.

In fact, the structure of the deposit is complex and reserves of about 240 million tonnes of oil are insufficient, which has prompted Total to alter the technical development plan, moving back by several years the date for reaching peak production of over 3 million tonnes a year.

The field was also found to contain large reserves of high-sulfur associated gas, which will require the project operator to build a $200 million facility at the field to process the gas and produce granulated sulfur.

Zarubezhneft began expressing interest in the project after Nikolai Brunich, the former head of Nenets Oil Company, was appointed general director.

Zarubezhneft and the Russian Energy Ministry began negotiating participation in the project in mid-2008. In November 2009 Total and StatoilHydro each agreed to cede 10% in the project to Zarubezhneft for a total of $65 million. Brunich signed the agreement with Total's Chistophe de Margerie during Prime Minister Vladimir Putin's visit to Paris late last year.

Following the Russian company's entry, the project includes Total with 40%, StatoilHydro - 30%, Zarubezhneft - 20% and Nenets Oil Company - 10%.