Total Sees Gazprom as `Key' Partner for Russian Energy Projects

By Tara Patel and Ryan Chilcote

Sept. 11 (Bloomberg) -- Total SA, Europe's third-largest oil company, sees a partnership with OAO Gazprom as ``key'' to developing energy projects in Russia.

``If we consider new projects there, it will be with Gazprom,'' Total Chief Financial Officer Patrick de la Chevardiere said in an interview with Bloomberg Television yesterday in London. ``We want to maintain our relationship. Gazprom is a key partner in Russia.''

Total and Norway's StatoilHydro ASA hold stakes of 25 percent and 24 percent respectively in a unit working on the Arctic field of Shtokman, while Gazprom holds the rest. Total counts the project among 15 ``building blocks'' to provide 12 billion barrels of oil equivalent in reserves and says it will make an investment decision at the end of 2009 or early 2010.

Gazprom has said the field holds enough natural gas to supply the world for one year.

Total, based in Paris, also plans to make bigger purchases among exploration and production companies internationally than in the past three years to boost output.

``The acquisition market has changed dramatically this summer,'' de la Chevardiere said. ``Some small companies share prices dropped 30 percent.'' Total is ``looking at possible targets'' around the world, and hasn't yet decided to approach one in particular, he said.

Canadian Assets

Total bought Synenco Energy Inc., the Calgary-based energy company developing an oil-sands project, at a cost of C$541 million ($505 million) to expand heavy oil operations. The French company bought Canada's Deer Creek Energy Ltd. for C$1.67 billion in 2005.

``We might make a bigger acquisition in the near future,'' Chief Executive Officer Christophe de Margerie said at an analyst conference in London yesterday on the company's outlook, referring to the Synenco deal. ``If we want to keep a strong upside in our portfolio we need to make acquisitions.''

Future acquisitions will be in sectors Total is missing in its exploration and production portfolio and will adhere to profitability requirements, de la Chevardiere said.

Total yesterday cut its annual production growth target because higher crude prices will prompt partners to demand a greater share of output.

Average output growth over the next decade will be 2 percent to 3 percent, de Margerie said. The estimate, based on crude prices of $100 a barrel, is lower than the 4 percent predicted a year ago for the five years through 2010, which was based on oil at $60.

Production Growth

The producer is relying on projects in Angola and Canada's oil sands to raise output as Kazakhstan and Venezuela restrict access to reserves.

Total said almost a fifth of production will come from LNG ventures by the middle of the next decade, with growth led by nine liquefaction projects already operating or under construction. A further five are being studied, it said.

Total plans to triple LNG output to 30 million tons a year by 2016, surpassing Exxon Mobil Corp. and remaining behind Royal Dutch Shell Plc, it said.

The company's LNG assets include stakes in projects in Yemen, Qatar and Angola, as well as Shtokman.

Total, Eni SpA and their partners in Kazakhstan's Kashagan field agreed to cede a greater stake in the development to the government in January. The project is at least seven years behind schedule.

``Our estimate for first oil is 2012,'' de la Chevardiere said. ``I am confident the new contract framework will be able to achieve this.''

Kazakhstan Energy Minister Sauat Mynbayev said Sept. 5 the field is on target to meet an October 2013 deadline for starting production.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net