MOSCOW -(Dow Jones)- Norway’s Statoil ASA (STO, STL.OS) signed Saturday a potential $100 billion cooperation agreement with Russian state oil company Rosneft (ROSN.RS) to develop Russia’s mostly untapped offshore energy resources in the Arctic.

Statoil joined Exxon Mobil Corp. (XOM) and Italy’s Eni SpA (E, ENI.MI), which signed similar deals earlier 2011, in a so-called “scramble for the Russian Arctic” following Russia’s approval of long-awaited tax breaks for the potentially rich offshore fields.

Russia faces declining oil production from its traditional oil regions and is eager to attract Western energy companies with money and expertise to develop the Arctic shelf. The move to open the Arctic shelf to foreign investors received support from Russian President-elect Vladimir Putin, who was at the signing ceremonies.

People familiar with the matter said that Russia’s energy czar, Deputy Prime Minister Igor Sechin–who isn’t expected to join the new Russian government to be announced in the coming days–had a prominent role in securing all three agreements.

Statoil‘s deal is structured similarly to those signed by Exxon and Eni with Rosneft. Statoil will set up joint ventures with its Russian partner to develop fields in the Barents Sea and Sea of Okhotsk, holding 33.33% in each.Statoil is to pay all costs for exploration, in addition to some historic costs and possible bonuses to the Russian company. The agreement also envisages Rosneft’s participation in Statoil projects in Norway’s offshore zones.

“Partnership between Rosneft and Statoil will contribute significantly to the development of economic relations between Russia and Norway, signifying a new era of unprecedented levels of trust,” said Rosneft President Eduard Khudainatov. The deal followed the final demarcation of the sea border between Russia and Norway in 2011.

“We aim for early access at scale in new and promising basins, positioning us for high-impact exploration. This agreement is at the core of our strategy, supporting our long-term growth ambitions,” said Helge Lund, chief executive of Statoil, in a statement.

The companies will jointly explore the Perseevsky license in the Russian part of the Central Barents Sea and three licenses–the Kashevarovsky, Lisyansky and Magadan-1–north of Sakhalin island in the Sea of Okhotsk. The four offshore licenses cover an area of more than 100,000 square kilometers and may demand an investment of between $65 billion to $100 billion dollars over decades.

Statoil is not new to Russia, being one of the first Western oil majors to open an office in Moscow after the collapse of communism. Until recently, however, it has failed to secure any big deal in the country. Statoil is part of an international consortium, together with Total SA (TOT, FP.FR) andGazprom (OGZPY, GAZP.RS), to develop the Shtokman liquefied natural gas project off the Russian Arctic Circle, but the project has suffered a number of delays on the investment decision.

Together with Russia’s second-largest oil company, Lukoil Holdings (LUKOY, LKOH.RS), Statoil is developing the West Qurna-2 field in Iraq but is planning to sell its stake to the partner.

“The deal has been discussed for some time, and it’s really good that it’s finally done,” Troika Dialog analyst Valery Nesterov said, adding that the fields “are not at all bad for exploration”

“It’s a sign that Russia is eager to intensify exploration at the Arctic shelf, and is trying to minimize risks by diversifying the partners,” he added.

Another Western player, BP PLC (BP) said Saturday it is also interested in participating in Arctic projects in Russia. The company may only invest in Russia through its 50-50 joint venture with a group of local billionaires, TNK-BP Holding‘s (TNBP.RS), in order to avoid violating a shareholders’ agreement following a London court’s decision. Last year BP’s Russian partners forced the company to give up an Arctic exploration project and share-swap deal with Rosneft.

Chris Einchcomb, TNK-BP‘s senior vice president of exploration and appraisal, said Saturday the company responded positively to Rosneft’s invitation to participate in the Arctic projects. “We look forward to starting working group meetings with Rosneft in the nearest future,” he said, adding that the company is able to bring in BP’s and its own offshore experience.

A BP spokesman said the company has yet to be presented with TNK-BPplans for activities in the Arctic, and “it will be premature to comment on these specific developments.” Lukoil has also expressed interest in partnering with Rosneft on the shelf.

Troika’s Nesterov said with more Arctic deals being signed with foreign companies, fewer fields remain for private Russian companies.

-By Alexander Kolyandr, Dow Jones Newswires

Gas tanker Grand Aniva carries the 500th delivery of LNG for Sakhalin-2 project, image (c) Sakhalin Energy

In a rather bold statement during a meeting between Sovcomflot’s (SCF) Board of Directors last week, the Board’s Chairman, Ilya Klebanov noted:

“Sovcomflot is the only major tanker company in the world which finished 2011 in profit, despite the crisis year which was the worst for more than a decade. The level of freight rates in the tanker market reached a historic minimum.”

During this time period, SCF’s fleet also grew by 1 million tons deadweight with the addition of 6, ice-class Aframax tankers to service the Sakhalin-1 and Sakhalin-2 offshore oil and gas projects.

SCF’s strategy going forward, as stated by Mr. Klebanov, is closely aligned with the expansion of their LNG carrier and offshore hydrocarbon production services in Russian and elsewhere around the world.

With their profit gained in 2011, SCF’s Chairman remarked that SCF plans “to proceed with the implementation of an investment programme aimed at increasing the fleet’s effectiveness, retaining high navigational safety standards, reducing our environmental impact, and developing the potential of our people.”

Sergey Frank, Sovcomflot’s President and CEO, states:

“Last year was the third year of tanker market stagnation. ClarkSea Tanker Index of profitability fell by 20 per cent as compared to 2010. For all the tanker owners, without any exception, it was not an easy period. However, even in such a situation Sovcomflot has demonstrated the stability of its business model and continued to develop in accordance with the strategy approved by the Board of Directors.

The Group’s fleet grew by more than one million tonnes deadweight and remained one of the youngest in the world. We have concluded a number of new contracts with first-class contactors, forming part of long-term projects, we have also entered the offshore geological exploration market segment. Sovcomflot’s stable position is confirmed by the growth of contracted revenues for future periods, which amounted to USD 5.5 billion dollars by the end of 2011.”

2011 Highlights 

The level of freight rates has reached a historic minimum over the last ten years. The Stock Market Index of public tanker companies fell by 47 percent while the ClarkSea Tanker Index of profitability in 2011 decreased by 20 percent as compared to 2010.

• 2011 gross revenue grew by 9.6 per cent to USD 1,438.9 million (2010: USD 1,312.9 million)
• Net profit amounted to USD 53.7 million (2010: USD 164.3 million);
• Contracted future revenues amounted to USD 5.5 billion (2010: USD 4.9 billion);
• As at 31 December the Group’s fleet comprised 155 owned and chartered vessels (2010: 147 vessels) representing 11.5 million tonnes dwt in total, average vessel age – 7 years;
• SCF Group has strengthened its position in the segment of shuttle-tanker transportation for hydrocarbons; the acquisition of six ice-class Aframax tankers allowed the company to consolidate the transportation component of the Sakhalin-1 and Sakhalin-2 offshore oil and gas projects;
• Substantial growth of revenues was achieved in market segment for servicing offshore oil and gas production – TCE revenues increased by 49.7 per cent amounting to USD 181.0 million (2010: USD 121.0 million);
• Suezmax tanker Vladimir Tikhonov (160,000 dwt) became the largest ship in the history to transit the Northern Sea Route (NSR) from the Atlantic Ocean to the Pacific Ocean; she transported a full cargo of gas condensate
• Long-term contracts were signed with Gazprom Global LNG (GGLNG), a subsidiary of Gazprom, for the chartering of two new generation LNG gas tankers of 170,000 cubic metres capacity each;
• The Aframax tanker Adygea started the transportation of oil to serve offshore oil production at the Peregrino oil field in Brazil (project operator – Statoil) – strengthening SCF Group’s position in the offshore oil and gas projects segment;
• SCF entered the offshore geological exploration market segment: a new high-tech scientific and research offshore exploration vessel Vyacheslav Tikhonov (X-bow 3D, built in 2011) managed by SCF Group and Sevmorneftegeofizika started seismic exploration of the Black Sea continental shelf ;
• SCF opened a new office in the South-East Asia – SCF Unicom Singapore, part of the Group’s expansion in the markets of the Asia-Pacific Region.

The SCF Group of companies (SCF) specializes in crude oil, petroleum products and liquefied gas transportation. Their fleet, as of 1 of April 2012, comprises 158 vessels with a total deadweight of almost 12.0 million tonnes.

Shtokman Field project features, Image courtesy Gazprom

MOSCOW -(Dow Jones)- Russian Prime Minister Vladimir Putin has reassured the chief executives of France’s Total SA (TOT) and Norway’s Statoil ASA (STO) that favorable tax conditions will be created for the giant Shtokman gas project in the Barents Sea.

“We have taken several tax decisions at the federal and regional levels (…) that will create favorable conditions for implementing the Shtokman project,” Putin said at a meeting in Moscow with Total’s Christophe de Margerie and Statoil‘s Helge Lund, according to a transcript on the government website.

The meeting took place after the Shtokman shareholders–Total, Statoil and Russian state gas firm OAO Gazprom (GAZP.RS)–had decided to postpone a final investment decision for the fourth time until July 1.

Shareholders had targeted a final decision by the end of March, but discussions have been held up after the shareholders pressed for tax breaks from Russian authorities for the challenging gas condensate field located in the icy waters about 650 kilometers north of Russia.

The Shtokman consortium, in which Gazprom holds a controlling stake, said it would work on further optimizing costs at the project, while awaiting Russian authorities’ decision on a potential tax-rebate.

“The challenge is to make this commercially viable,” a Statoil spokesman said. “We are continuing to work on optimizing the project to maintain a good dialogue with Russian authorities.”

Shtokman field will be resource base for Russian gas exports to Atlantic basin markets. Discovered in 1988, the Shtokman gas and condensate field is located in the central part of the Russian sector of the Barents Sea shelf, about 600 kilometers northeast of Murmansk, where sea depth varies between 320 and 340 meters. C1 reserves of the field make up 3.9 trillion cubic meters of gas and 56 million tons of gas condensate, with 3.8 trillion cubic meters of gas and 53.4 million tons of gas condensate located within Gazprom’s licensed area. via Gazprom

Last week, however, Russia’s deputy Finance Minister Sergei Shatalov cast doubt about the project, saying that so far the Shtokman partners had failed to provide the necessary information needed to make a decision on tax breaks.

The Russian government is preparing a range of tax incentives for offshore projects, but the process is taking longer than expected. Thursday, Energy Minister Sergei Shmatko said that due to high operating expenses and investment volumes the internal rate of return for offshore projects should “significantly exceed the 16% level” that is set for East Siberian fields, according to the Interfax news agency.

The shareholders plan to begin production from Shtokman in 2016 and launch a liquefied natural gas plant in 2017.

-By Jacob Gronholt-Pedersen, and Kjetil Hovland in Oslo, Dow Jones Newswires

Sakhalin field developments, click to enlarge

MOSCOW (Dow Jones)–Russian state gas firm OAO Gazprom (GAZP.RS) will begin production at its massive Sakhalin-3 offshore gas project in the Far East in the second half of the year and reach output of 4.2 billion cubic meters a year by 2015, the company said Wednesday.

Gazprom–the world’s biggest producer of natural gas–said first gas will come from the Kirinsky block at Sakhalin off Russia’s Pacific Coast and feed into a major new pipeline from Sakhalin via Khabarovsk to Vladivostok.

The company plans to drill a total of six wells at the Kirinsky block by 2014. Estimates of reserves at the block have increased to 137 billion cubic meters from 75 billion cubic meters over the last two years.

-By Jacob Gronholt-Pedersen, Dow Jones Newswires

MOSCOW -(Dow Jones)- Russian Prime Minister Vladimir Putin, strong favorite to win the presidential election on Sunday, said Wednesday Russia should allow non-state companies access to explore offshore reserves, because current restrictions hinder production growth.

“We have (previously) made a decision that only state-controlled companies may work offshore in the northern seas. This, in my view, is slightly constraining production development,” Putin said according to the Interfax news agency.

“We have to consider what can be done further to broaden the opportunities,” he said.

Currently only state-controlled OAO Gazprom (GAZP.RS) and OAO Rosneft (ROSN.RS) have the rights to develop strategic offshore reserves.

-By Jacob Gronholt-Pedersen, Dow Jones Newswires

An unconfirmed photo of the Inzhener Nazarov on fire in the Caspian Sea

A fire on board a Russian oil tanker claimed the life of at least one crewmember in the Caspian Sea on Tuesday.

Russian news agency RIA Novosti, citing a regional Emergencies Ministry, reported that the fire started in the deck housing of the 4,700 dwt tanker Inzhener Nazarov at approximately 12:35 Moscow time and quickly spread to other parts of the ship.  Several crewmen of the 14 on board were forced into the water but were picked up by ships in the area while others stayed on board to battle the blaze.  1 person was reported to have been killed.

Several ships including fire fighting vessels quickly responded to the scene to assist with the rescue and firefighting efforts.

The Inzhener Nazarov was enroute from Turkmenistan to Makhachkala, Russia when the fire broke out.

The incident is currently being investigated.

A Maltese-flagged cargo ship caught fire yesterday while stuck in heavy ice in the Azov Sea.  The vessel, the M/V Captain Ivan Vikulov, sent a distress signal to maritime authorities in the Ukraine Sunday morning requesting assistance.

The icebreaker, Kapitan Moshkin, along with a helicopter were dispatched to the scene to rescue 14 Russian crew members on board. 10 crew members were evacuated by helicopter as 4 remained onboard to fight the fire. The four were later forced to retreat to the icebreaker as the fire engulfed the vessel.

The news agency Interfax has reported that the fire has been extinguished and that the vessel is currently at anchor some 50 km off the coast near the village of Strilkove. Interfax also reported that the Captain Ivan Vikulov was heading from Algeria to Rostov-on-Don but has been blocked by ice since January 28.

The Ice-classed LNG carrier, Ribera del Duero Knutsen, owned by Knutsen OAS Shipping

*Editor’s Note: Changed title to include Northeast Passage, not Northwest Passage as was originally reported.

OSLO (Dow Jones)–Russia has for the first time authorized a Liquefied Natural Gas tanker to sail through its Arctic waters from Europe to high-demand Asian markets, a route that requires about half the usual sailing time, potentially reduces costs and avoids the threat from Somali pirates.

Russia authorized the tanker Ribera del Duera Knutsen to sail along the Northern sea route from the Atlantic ocean to the Pacific ocean, Norwegian shipping company Knutsen OAS Shipping said.

In September, Russian Prime Minister Vladimir Putin said that he sees the future of the Northeast Passage “as that of an international transport artery” able to compete with other maritime routes on both fees, safety and quality.

From Europe, the route is a much shorter way to the Far East than sailing across the Mediterranean Sea and through the Suez Canal, which requires ships to sail through the ‘pirate alley’ in the Gulf of Aden north of Somalia.

It would save a lot of time and money, Knutsen’s Chartering Manager John Einar Dalsvag said, as current LNG rates are at a very high level of about $150,000 a day, so “days are expensive.”

Using the shorter Northern route means sailing in icy Arctic waters from the Barents Sea along Siberia to the Bering Strait, then on to Japan or other countries in the Far East.

Japan’s demand for LNG has climbed sharply after an earthquake and a tsunami knocked out several nuclear power plants in 2011. In December, only seven out of Japan’s 54 nuclear power plants were in operation because of safety concerns. Electricity production has largely been replaced by thermal power plants.

The LNG tanker’s journey along the Northern sea route to Japan would take about 20 days, according to Knutsen OAS Shipping, based in Haugesund, Norway. Due to the icy conditions, the ship must sail the route at some time between June and October, according to the company.

However, the company said the authorization only means the journey is technically possible, as it hasn’t yet signed any contract to deliver LNG by this route.

The Ribera del Duera Knutsen is the only LNG tanker with ICE-1A class notation from classification society Det Norske Veritas, which means it can handle ice thickness of up to 0.8 meters, according to the company.

Knutsen OAS Shipping has “studied all risks”, says Dalsvag, adding that such a journey would require two Russian icebreakers to accompany the ship.

The company said it hasn’t yet calculated what this would cost, or how much time and fuel this route would save them compared to the longer trip through the Suez Canal.

-By Kjetil Malkenes Hovland, Dow Jones Newswires

The incident occured on July 10, 2011 when the riverboat, overloaded with more than 200 passengers, sank during a storm killing 122 people.  An investigation into the incident found that the ship sank after water flowed into 38 portholes that were left open.  The report also found that the vessel was heavily overloaded, a poorly trained crew and failing to inform navigation traffic controllers of the cruise were to blame.

Tuchin is the fifth person to be charged in connection to the incident.  Others included the general director of the company that rented the cruise boat, the river fleet inspector who certified that the Bulgaria was fit to sail, and two senior transport inspectors that allowed the  company to carry passengers despite the vessel lacking the appropriate license.

Yury Tuchin, who was captain of the Arbat cargo ship, pleaded guilty to not stopping to collect survivors, but said he had only done so because his ship risked crushing the lifeboats, according to the report.

The case is reminiscent of the classic Seinfeld finale, where the Seinfeld clan was sentenced to a year in prison for violating the “Good Samaritan Law” when they failed to help a man being mugged.