Total Gets Positive Sign on Shtokman; Raises Capex

PARIS Sep 6, 2006 (Dow Jones Newswires)

Total SA (TOT) will speed up talks with Russian gas major Gazprom OAO (GSPBEX.RS) on its possible participation in the Shtokman liquefied-natural-gas project, Christophe de Margerie, Total's head of exploration and production, said Wednesday.

Total's Chairman and Chief Executive Thierry Desmarest "received a letter a few days ago" from Moscow which said the company should prepare itself for more active discussions on the project, Margerie said at an analyst conference in Paris.

The letter however, doesn't give any visibility on when Gazprom will make its final decision, but "it's rather good news," Margerie said at an analyst conference in Paris.

Total was shortlisted in June 2005 to work with Gazprom on the EUR15 billion Shtokman LNG project. The massive gas field in the Barents Sea holds an estimated 3.6 trillion cubic meters of natural gas.

Chevron Corp.(CVX) and ConocoPhillips (COP) of the U.S., and Norway's Statoil ASA (STO) and Norsk Hydro ASA (NHY) have also been shortlisted.

Norsk Hydro and Statoil also said Wednesday they have received letters from Gazprom relating to Shtokman. "We have received a letter to invite us to discussions, but can't comment on the details," said Kama Holte Strand, communications manager of international business affairs at Norsk Hydro. Ola Morten Aanestad, vice president of media relations at Statoil said: "I can confirm we received a letter." But he added there is nothing new within the document.

Russia's Energy and Industry Minister Viktor Khristenko has said a decision could be made in October. A person at Gazprom told Dow Jones Newswires that "a decision is now seen as likely by the end of the year." Menno Grouvel, Total's senior vice president for continental Europe and central Asia, recently said in a recent interview with Dow Jones Newswires that Total is looking for a 20% stake in the project, which is expected to go online in 2012.

Total, the world's sixth-largest oil company by market capitalization, is one of the few international oil majors with practically no presence in Russia.

In return for its involvement in Shtokman, Total has earlier said it would invite Gazprom to take part in three of its own projects.

Total declined to detail the asset swaps, a key element in Gazprom's decision.

A Paris-based analyst who spoke on condition of anonymity said that given the complexity of this bidding process, it wouldn't be wise to extrapolate too much on Margerie's comments.

"The Norwegian contenders badly need the Shtokman project far more than Total in order to renew their reserves," the analyst said, adding it wouldn't be a major setback for Total if it wasn't included in the Russian LNG project.

Margerie reiterated that the company aims to grow its hydrocarbon output by 4% a year on average between 2005 and 2010 based on a price of $40 a barrel, as new oil projects come online gradually.

Following an 8.6% drop during the second quarter of 2006 to 2.29 million barrels of oil equivalent, output will rebound significantly in 2007, he said.

Production will be boosted by the startup of the Dalia field in Angola by the end of this year, Margerie added.

The company also said Wednesday it has raised its budgeted capital expenditure, excluding acquisitions, to $14.5 billion for 2006, from $13.5 billion previously.

The company said half of the $1 billion increase in capex comes from new exploration programs, while $300 million will be generated by cost inflation on existing investment programs.

Responding to an analyst question about the company's investment budget for the long term, Desmarest said: "We're seeing it in the range of $15 billion to $16 billion per year."

At 1415 GMT Total's shares were trading down 1.70% or EUR0.90 at EUR51.90.

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