Total Agrees to Buy $4 Billion Stake in Novatek
Total SA (FP), Europe’s third-biggest oil company, agreed to buy 12 percent of OAO Novatek and join the Yamal LNG project to snap up reserves as international energy producers rush to explore Russia’s Arctic resources.
“It is a good deal that has great potential,” Prime Minister Vladimir Putin said at his residence near Moscow late yesterday after the heads of Total and Novatek signed accords.
Total is paying about $4 billion for the Novatek stake, said Chief Executive Officer Christophe de Margerie. The French explorer plans to raise its holding to 19.4 percent within three years, according to a statement.
Global oil producers are looking to Russia to boost reserves amid unrest in northern Africa and the Middle East. Russia, the world’s biggest energy producer, needs foreign expertise to develop projects in harsh, remote areas to maintain output and wants to boost liquefied natural gas output to expand in growing Asian markets and compete in Europe.
Novatek shares climbed as much as 5.9 percent to 389.97 rubles, before erasing gains to trade down 0.5 percent at 366.68 rubles at 2:53 p.m. in Moscow. Total rose as much as 2 percent to 44.22 euros in Paris.
Novatek gained more than 30 percent in the previous three months, raising the value of the stake to $4.7 billion based on yesterday’s close. That is more than the company’s market value in 2004 when Total made a failed bid to buy 25 percent.
Safe Russia
Total will gain access to equity production of 120,000 barrels of oil equivalent a day and about 1 billion barrels of proved and probable reserves, and appoint a director to Novatek’s board, the company said in a statement.
“Russia is today the go-to place for energy deals,” Chris Weafer, chief strategist at UralSib Financial Corp., said in a note today. “It has the resource base and is open for business with clearer investment rules.”
The recent upheavals in oil and gas producing countries show the need to be in Russia, de Margerie said yesterday in a meeting with President Dmitry Medvedev, according to a Russian transcript. Russia has safer conditions for investment, he said.
Putin in January praised a planned strategic alliance between BP Plc and state-run OAO Rosneft, Russia’s largest oil producer, to swap shares and explore Arctic offshore resources. TNK-BP, BP’s oil venture with a group of billionaires, is seeking to replace the U.K. company in that deal.
Major Deals
The Russian prime minister, who approves major energy deals in the country, pledged “good administrative support” for Total at a meeting with de Margerie in June.
Total will gain 20 percent of the Novatek-led Yamal LNG project, according to yesterday’s agreement. The companies aim to complete the deal in the first half, Total said.
“It is great that Total was picked,” said Alexander Nazarov, an oil and gas analyst at IFC Metropol in Moscow. “Novatek has raised its chances of implementing the project.”
Total is also working with OAO Gazprom, Russia’s gas export monopoly, to develop the Shtokman field. De Margerie in June urged Putin to keep the Arctic project on track. Delays have put its first gas in 2016 and LNG in 2017. Shtokman may start in 2018, said Pyotr Sadovnik, deputy head of the subsoil resources agency, last month.
Shtokman and Yamal won’t conflict, de Margerie said.
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