Statoil Takes $355M Charge On Shtokman Write-off

OSLO - Norway's Statoil ASA said Tuesday it had written off its 24% stake in a consortium developing Russia's Arctic Shtokman gas field after the agreement lapsed, but remained interested in the project.

The initial agreement, in which Russia's OAO Gazprom held a controlling 51% stake and France's Total SA 25% in the consortium, expired at the end of June with the three companies failing to agree on technical and financial plans to develop the massive gas field.

As it had stated it would do if the agreement lapsed, Statoil booked a charge of 2.1 billion kroner (EUR 286 million or USD 355 million) that completely writes off the value of the stake, said spokesman Fredrik Norman.

"But we remain in discussions with Gazprom with the goal of continuing this project in a profitable way," he told AFP.

Some analysts nevertheless said the move may signal a possible disengagement by Statoil from the technologically complex and expensive project as the company has other projects which would provide higher returns.

Statoil and Total were reported to have been unhappy with cost overruns and delays that hit the Gazprom-led venture--a field discovered two decades ago but still untapped because of its forbidding environment in the Arctic.

Total has declined to comment on the future of Shtokman's development except to signal its continued interest.

Gazprom said the makeup of the consortium to develop the Barents Sea field it believes holds enough natural gas to supply the world for a year would not be decided before September.

Russian news reports said Royal Dutch Shell PLC may join the project.

Copyright (c) 2012 Dow Jones & Company, Inc.


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Anonymous | Sep. 5, 2012
There is a large difference in bureaucracy, intentional delays and personnel in the wrong position (i.e. lack of background for the information one is trying review). Having been close to the project, the issue was not the arduous bureaucracy or regulations. It was a combination of Andreass assertion and wrong people/wrong position. This is a common problem in geographic areas where family ties secure positions as opposed to experience being the key. Many times there can be solutions to these types of problems however; this poster presumes the stakes are to high (for Russia or Gazprom) for the project to continue with the proper greasing of palms and pockets. Truthfully, its disappointing to see that things failed however; it sends a subtle message that increasing companies wish to handle their business above the desk now...which is a good thing.

Andreas Gabrielle | Aug. 10, 2012
Each project has the same problem in Russia - corruption breaks all rules and standards, it is impossible to drive your Russian partner to the corner when you find the partner is fabricating costs. It result project cost grows in times and the quality is cheapest.

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