Russian Oil Minister Completes Prirazlomnoye PSA

The Russian Ministry for Industry and Energy has prepared and sent to the government documents required for the production sharing agreement to govern the development of the Prirazlomnoye oil and gas field to come in force, the news agency Prime-Tass reported late Thursday.

Russian state oil major OAO Rosneft (RNT.YY) and natural gas monopoly OAO Gazprom (GSPBEX.RS) are jointly developing Prirazlomnoye in the Barents Sea.

The first commercial oil is expected to be produced at the deposit in 2005.

The project, which envisages the construction of an ice-resistant sea platform, drilling, production, storage and transportation of oil from the field, is the first pilot development of an offshore hydrocarbon field in the Arctic, Andrei Dementyev, a department director at the ministry, said in a statement.

Oil produced at the field will be transported by shuttle tankers from the ice-resistant platform to a floating oil storage facility in the Barents Sea bay of Pechenga, and on from there by tankers of larger capacities. The project's estimated lifespan is 25 years, during which a total of 74.6 million metric tons of oil, or over 500 million barrels, should be produced.

The government's revenues from the project are estimated to total between $2.10 billion and $3.30 billion if the oil price stays at $19-$21.50/bbl.

The State Duma, lower chamber of parliament, is likely to consider the draft PSA in September, Rosneft's vice-president Sergei Alekseyev said in mid-July.