PARIS – French energy company Total SA is hooking up with Russia’s largest private oil company to explore and develop a huge Siberian shale oil field, despite Western sanctions and anger over the Kremlin’s role in Ukraine’s crisis.
The deal signed Friday with Russia’s Lukoil draws new attention to French economic ties with Russia, and the French government’s reluctance to punish Moscow too heavily.
Total says in a statement that the two will set up a joint venture to develop the Bazhenov oil formation in western Siberia, believed to hold some of the world’s largest shale oil deposits. It says Lukoil will have 51 per cent of the venture and Total 49 per cent.
The statement gives no value for the deal, which had been under negotiation for months. The ITAR-Tass news agency quotes Lukoil CEO Vagit Alekperov as saying the companies will invest $120 million to $150 million.
The deal highlights a divide within Europe over how to handle Russia. France and other European countries with big Russian trade and energy connections have been cautious, while Britain, the United States and Poland have toed a tougher line.
French executives have lobbied their government to go easy on Russia over Ukraine, arguing that long-term investments are at stake, according to officials at two French companies active in Russia.
European companies involved in Russia are already losing money because of economic uncertainty linked to Ukraine’s crisis and the first two rounds of sanctions. The threat of tougher U.S. and EU sanctions looms if Russia tries to derail Ukraine’s presidential election Sunday.
French bank Societe Generale had to write down 525 million euros ($731 million) on its Russian activities in the first quarter. A French ship-building company, meanwhile, is sticking to plans to make two warships for the Russian navy in a deal criticized by France’s allies but hailed as a boost for French industry and jobs.