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Highlights

OMV to buy 24.98% stake in Achimov project instead

Deal previously was swap for stake in OMV Norge

Oslo had expressed concern about Gazprom presence

London — Gazprom will no longer pursue an asset swap deal with Austria's OMV that would have given the Russian gas giant an upstream presence on the Norwegian Continental Shelf.

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According to a new deal signed late Wednesday in St Petersburg, OMV has agreed to buy a 24.98% stake in the Gazprom-led Achimov 4A and 5A phase gas development project "in a straight cash transaction."

It replaces a previous deal from December 2016 that would have seen OMV take the Achimov stake in return for Gazprom taking a 38.5% stake in OMV's Norwegian subsidiary, OMV Norge.

"The signing of the final transaction documents is expected at the beginning of 2019," OMV said in a statement.

The purchase price for the stake, OMV said, would be "negotiated in good faith."

Once the deal is completed, Gazprom's stake in the project to develop the Achimov 4A and 5A phases of the Urengoy gas field in northern Russia will fall to 50.01%. Germany's Wintershall holds the remaining 25.01%.

NORWEGIAN OPPOSITION

Finalizing the original asset swap deal had proved problematic, not least due to Norwegian concerns over the arrangement.

Norway's energy ministry earlier this year said that Gazprom owning gas assets in the Norwegian offshore could bring into question Europe's security of supply given Russia's already dominant role in gas supply to Europe.

It is unclear whether Norway formally shared its objections with the companies, or whether Gazprom and OMV opted to abandon the asset swap for other reasons.

Asked whether Oslo's position affected the deal, an OMV spokesperson said only: "Both parties agreed on the transaction in this way to be able to work as partners in this important project as soon as possible."

"OMV and Gazprom have been discussing the deal for a long time and both companies consider the development of Blocks 4A and 5A in the Achimov formations important," the spokesperson said.

OMV's production in Norway last year averaged 79,000 b/d of oil equivalent -- both from oil and gas assets.

Had Gazprom taken a 38.5% stake in OMV Norge, its Norwegian equity production would therefore have been some 30,000 boe/d.

OMV's Norwegian assets include stakes in the producing Gullfaks, Gudrun and Edvarg Grieg fields. It also has a 15% stake in the major Aasta Hansteen gas field that is due to begin production in the coming months.

STRATEGIC PARTNERSHIP

Gazprom and OMV have been close partners for five decades and in June agreed to extend their agreement for Russian gas supplies to Austria until 2040.

Gazprom CEO Alexei Miller said the Achimov deposits of the Urengoy field were expected to produce until 2069. "This means we have 50 years more of fruitful work ahead," Miller said.

"We are expanding our strategic partnership with Gazprom throughout the production chain -- from production in Russia to deliveries to European gas markets," OMV CEO Rainer Seele said.

On Thursday, Gazprom and OMV said they had also signed a new memorandum on strategic cooperation. The document envisages the creation of a joint coordinating committee on collaboration in the gas sector, both upstream and downstream, science and technology.

"With the newly-signed memorandum, we will consolidate our joint activities with OMV in the areas of ongoing and potential cooperation into a single coordination center and bring it to a brand new level," Miller said.

Production at the Achimov 4A and 5A phases, meanwhile, is expected to start up in 2019 and to reach a plateau of more than 80,000 boe/d in 2025 net to OMV.

Output from the first phases of the hard-to-reach Achimov deposits began in 2011 with annual production of some 18.5 Bcm.

OMV in December last year also closed a deal to buy 24.99% in the West Siberian Yuzhno-Russkoye gas field from German energy group, Uniper as it looked to build its upstream presence in Russia.

Yuzhno-Russkoye, launched in 2007, has been producing at plateau of 25 Bcm/year of gas since 2009, and serves as the key supply source for the 55 Bcm/year Nord Stream gas pipeline running from Russia to Germany across the Baltic Sea.

--Stuart Elliott, stuart.elliott@spglobal.com

--Edited by Maurice Geller, maurice.geller@spglobal.com