Gazprom Delays Shtokman Decision Until Autumn

July 16, 2012
The head of Russia's gas giant Gazprom on Friday pushed back the choice of foreign partners on its massive northern Shtokman field project until September at the earliest.

Alexei Miller said that Gazprom was holding "final consultations about the configuration" of the project to develop a Barents Sea field it believes holds enough natural gas to supply the world for a year.

"We expect their conclusion by early autumn," Russian news agencies quoted Miller as saying.

The latest delay came just a week after Miller said he might in a matter of days make a formal announcement about whether current partners Total and Statoil were keeping their place in the project.

French firm Total owns a 25 percent stake in Shtokman's development company while Norway's Statoil holds a 24 percent share under a framework agreement that expired on July 1.

But both have been reported to be unhappy with cost overruns and delays hitting the Gazprom-led venture -- a field discovered two decades but still untapped because of its forbidding environment in the Arctic.

Russian reports have suggested that Statoil would now like to see Total -- the company most frequently mentioned as seeking an exit from the venture -- replaced by Royal Dutch Shell.

Shell's CEO Peter Voser recently met President Vladimir Putin and is already working alongside Gazprom on natural gas production off Russia's Far East coast in Sakhalin.

Yet analysts believe that Gazprom will have trouble completing any Shtokman investment deal until the government follows through on its promise to provide tax relief on the project.

Gazprom has most recently estimated the field's production cost at $40 billion.

Interfax cited Gazprom sources as saying that $1.5 billion had been invested in the project already -- most of it presumably by the Western firms under the standard practice followed at initial project stages by the Russian monopoly.

One Gazprom source told the agency the project's shareholder agreement stipulated that the foreign partners would lose their investment should they withdraw before production begins.


Copyright 2012, AFP. All rights reserved.