MOSCOW, July 1 (RIA Novosti) - Russian and U.S. oil majors LUKoil and ConocoPhillips have established a joint venture, Naryanmarneftegaz, on the development of hydrocarbon reserves in the Timan-Pechora gas-bearing province, in northern Russia, a LUKoil news release said Friday.
ConocoPhillips purchased a 30% stake in the new JV for $500 million.
LUKoil and ConocoPhillips will run Naryanmarneftegaz on a parity basis. Its maximum oil output is expected at 200,000 barrels a day. The recovered crude will be taken to LUKoil's Varandei terminal, on the Barents Sea, from where tankers will deliver it to overseas markets. LUKoil plans to increase the terminal's capacity to a daily 240,000 barrels in 2007, with ConocoPhillips' financial and technical assistance.
Bill Berry, ConocoPhillips' executive vice president of exploration and production, said the new JV would allow his company to become involved in all major projects in the region, which has great potential for growth. LUKoil holds a number of licenses for oil production there, and has accumulated substantial expertise in recovering hydrocarbons in hard-to-access Arctic deposits, he said.
Berry added that he hoped the partnership between the two hydrocarbon giants would pave the way for the opening of a new important energy-producing area in Russia.
First Vice President of LUKoil Ravil Maganov said the company was pleased to have ConocoPhillips as Naryanmarneftegaz's co-founder and praised the American company for helping with the development of northern Russian deposits, including Yuzhno-Khylchuyuskoye, where production is set to commence in 2007. "We are certain that ConocoPhillipps' experience in the Arctic will enrich our own, helping to advance the region's development with the use of state-of-the-art technologies and with maximum care taken of the natural environment," the LUKoil official said.
Naryanmarneftegaz has been set up as part of a wide-ranging strategic ConocoPhillips-LUKoil alliance, formalized on September 29, 2004. Within the framework of this alliance, ConocoPhillips acquired over 11% of LUKoil's ordinary shares. Under the terms of the deal, the U.S. company's stake in LUKoil may be increased to 20%.
LUKoil, Russia's largest oil producer, is the world's second biggest private company in terms of proven hydrocarbon reserves and is sixth in terms of output. It plans to produce 90.2 million metric tons of crude this year. It controls 1.5% of total global oil reserves and accounts for 2% of the world's oil output.
