UPDATE: Russia Could Grant Tax Advantages For Shtokman -Executives

Russia could provide special tax arrangements for the consortium planning to develop the giant offshore Shtokman gas field, an executive from energy major Total SA (TOT) said Wednesday.

Given that Shtokman is a "frontier project" and a major offshore development that would "open a new oil province," it "appears quite logical that there should be a dialogue on tax," Total's senior vice-president for continental Europe and central Asia, Arnaud Breuillac, told reporters on the sidelines of an energy conference in Paris.

A dialogue between the Shtokman joint venture and the Russian authorities is underway, he said.

"It is not abnormal and certainly not unprecedented" for a special system for taxing the project to be put in place, he said, adding: "It is far too soon to say what it will be."

The managing director of Shtokman Development also alluded to the prospect of a tax advantage.

If the project is in Russia's interest, bringing industrial development and new technology, then "of course I think we shall receive a certain reward," Yuri Komarov told conference delegates.

Russia's OAO Gazprom (GAZP.RS) owns 51% of Shtokman Development, a joint venture with Total, which owns a 25% stake, and Norway's StatoilHydro ASA (STO), which owns the remaining 24%.

The consortium members are looking to make final investment decisions by the end of the first quarter of 2010.

While the current market environment "is actually helping things" in terms of costs, Breuillac joked that it would be "extremely good news" if the price-tag for phase one of the project turns out to be lower than the $15 billion estimate worked out in 2006.

Shtokman partners will be able to provide an update on when to expect the field to start producing gas, once it has better gauged the prices contractors would charge, he said.

Such details would come "probably a bit sooner" than the final investment decision, he said. Total has no intention of mothballing the project and wants to move forward as quickly as possible, he said.

Total Chief Executive Christophe de Margerie said in February that the key question before it finalizes approval for its planned investment in Shtokman would be whether it was economically viable.

If the French oil major were to deem the cost of the project above $80 a barrel of oil equivalent, then it might have cause to pull out, delay, restructure or make it smaller, de Margerie said.

-By Adam Mitchell, Dow Jones Newswires; 33 1 4017 1756; [e-mail]