Integrated oil and gas company TOTAL S.A. (TOT) deepened its presence in Russia by entering into two noteworthy Memorandums of Cooperation with the largest Russian independent gas producing company, OAO Novatek.
The first memorandum involves TOTAL as the major international partner for the Yamal LNG project holding a 20% share while Novatek reserves a 51% interest. The second recent initiative in Russia will see TOTAL acquiring a 12.08% stake in Novatek with an option to increase the share to 15% within 12 months and to 19.4% within 36 months, subject to approval of both parties.
The Yamal LNG project will develop the South Tambey field located in the Arctic area of the Yamal peninsula, estimated to have approximately 44 trillion cubic feet of gas. TOTAL with its 20% interest in the project will have access to proved and probable reserves of 800 million barrels of oil equivalent (boe) within the licence duration.
Regarding the 12.08% stake in Novatek, TOTAL will acquire it in the open market from the Russian company’s two major shareholders. The holding will cost TOTAL $4 billion and is expected to close by April 2011 giving the company the right to appoint a representative in Novatek’s Board.
TOTAL’s operations in Russia date back to 1989. The company has a 40% operating interest in the Kharyaga field located in the Nenets Autonomous Region. The company is also in agreement with another Russian company, Gazprom, for the first phase of development on the Shtokman gas and condensates field located in the Barents Sea. This new agreement would further consolidate TOTAL’s presence in Russia.
TOTAL is expanding its operations globally through strategic alliances and partnerships. Besides its endeavors in Russia, the company in recent times (December 2010) entered into an alliance with Suncor Energy Inc. (SU) for oil sands assets in Alberta, Canada raising its interest in Suncor’s Fort Hills project to 39.2%.
TOTAL S.A. currently retains a Zacks #3 Rank (short-term Hold rating). We maintain a long-term Neutral rating on the stock.
France-based TOTAL is one of the largest publicly traded, globally integrated oil and gas companies based on production volumes, proved reserves and market capitalization. The company has exploration and production operations across five continents.
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