International oil giants ConocoPhillips and Lukoil have created OOO Naryanmarneftegaz, a joint venture company charged with developing oil resources in the northwest Arctic Russia to be sold worldwide.

ConocoPhillips has a 30% interest in the joint venture, for which it paid $500 million. However, the companies will govern the entity on a 50/50 basis.

The Naryanmarneftegaz joint business is expected to be producing and marketing approximately 200,000 barrels of oil equivalent per day (BOEPD) at peak. Production from the joint-venture fields is expected to be transported via pipeline to Lukoil’s existing terminal at Varandey Bay on the Barents Sea and then shipped via tanker to international markets. Lukoil will expand the terminal capacity to 240,000 BOEPD in 2007, with ConocoPhillips participating in the design and financing of the terminal.

This joint venture will provide ConocoPhillips with the benefits of involvement across the entire value chain in an area that holds several important development opportunities, said Bill Berry, executive vice president, Exploration and Production, for ConocoPhillips.

The Naryanmarneftegaz joint venture is part of a larger strategic alliance between ConocoPhillips and Lukoil. Through this alliance, ConocoPhillips had acquired an 11.3% ownership of Lukoil’s ordinary shares by March 31, 2005. In accordance with the shareholder agreement, ConocoPhillips may increase its total ownership stake in Lukoil up to an aggregate ownership interest of 20%.