Conoco welcomes Russia's PSA encouragement

Conoco Inc. says that Russian President Vladimir Putin's encouragement of production-sharing agreements could improve Russia's investment climate. Last week, Putin signed a law enabling negotiations for a PSA on the giant Shtokmanovskoye field; both houses Parliament had already approved the draft law. Conoco has been involved in discussions for some time for a production-sharing contract for an area in the northern territories that includes acreage in the Timan-Pechora oil and gas province.


Conoco Inc., Houston, says that Russian President Vladimir Putin's encouragement of production-sharing agreements could improve Russia's investment climate. Last week, Putin signed a law that would enable negotiations for a PSA on the giant Shtokmanovskoye field (OGJ Online, June 6, 2000). Both houses of the Russian Parliament had already approved the draft law.

Conoco is involved in two opportunities that could benefit from the changing political climate. As part of the Polar Lights venture, Conoco is participating in an oil project in the northern territories, and with Gazprom and its subsidiary Rosshelf, it is participating in the Shtokmanovskoye natural gas project.

"We've had noteworthy success with our Polar Lights joint venture in Russia and would like to expand our investment under the right conditions," says Rob McKee, executive vice-president of exploration and production for Conoco.

What's next
With the approval to negotiate PSAs on Shtokmanovskoye and in the northern territories, Conoco is carefully and strategically moving closer to development of these two projects, both of which contain huge reserve potential, McKee says.

The Shtokmanovskoye field, discovered in 1988, is located in the central part of the Barents Sea, 600 miles northeast of the city of Murmansk, in about 1,000 ft of water. The Russian Federation estimates reserves for the field to be around 100 tcf of gas and 250 million bbl of condensate, based on data from six wells that have penetrated four separate reservoirs in the field.

Conoco and partners Gazprom, Rosshelf, TotalFinaElf SA, Norsk Hydro AS, and Fortum Oy still must negotiate the PSA contract with Russia. McKee says he hopes the companies can reach a final agreement on the PSA with the Russian government in 2001.

"With a PSA in hand, the project sponsors can start negotiations with potential gas buyers," McKee says.

PSA negotiations for the Northern Territories project are already underway. The area includes 1.2 million acres in the Timan-Pechora oil and gas province in Russia, above the Arctic Circle. The giant undeveloped Yuzhno Khilchuyu field is in the territory.

Lukoil, Russian firm Arkhangelskgeoldobycha, and Conoco have agreed that Lukoil will hold a 60% participating interest in the Northern Territories project, and Conoco will hold the remaining 40%. The law approving the Northern Territories project for development under production sharing terms was signed by then-President Boris Yeltsin in November 1999.

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