UPDATE 2-Gazprom may delay key field due to low gas demand

Tue Jun 16, 2009 7:45am EDT

Related Topics

* Gazprom announces first project delay since crisis

* Expects output to be depressed until 2012

* Sees gas demand picking up in Europe since April

(Adds quotes, details)

By Vladimir Soldatkin

MOSCOW, June 16 (Reuters) - Gazprom (GAZP.MM), the world's biggest gas producer, may delay the launch of a major field because it expects gas demand in Russia and Europe to be depressed through 2012, an executive said on Tuesday.

Deputy Chief Executive Alexander Ananenkov told a news conference Gazprom may postpone the giant Bovanenkovo field by one year to the third quarter of 2012.

"We see that there will be no demand for that gas. So why invest money in what is not in demand?" said Ananenkov.

Bovanenkovo is due to become the first deposit to go on stream on the Arctic Yamal peninsula and if postponed would become Gazprom's first major project to be hit by the crisis.

Ananenkov said Gazprom expects to produce 507 billion cubic metres in 2010, 510 bcm in 2011 and 523 bcm in 2012 -- sharply down from 550 bcm in 2008.

In 2009, Gazprom could produce as little as 450 bcm and as much as 510 bcm this year, he said. The final figure would depend on the economic recovery and on the weather.

"If the fourth quarter is cold, no-one will save money on their own health," he said.

The delay in the launch of Bovanenkovo would allow Gazprom to reduce 2009 capital expenditure to 500 billion roubles ($16.05 billion) from the earlier planned 637 billion roubles.

"There is a need to change our investment programme - not to fully stop but to slow it down - and to lower capital expenditures", he said.

Gazprom has been steadily increasing its production over the past decade to achieve its goal of boosting its market share in Europe to 33 percent from 25 percent.

But the global financial crisis has knocked it back by two decades in terms of production volumes because of lower demand from industry.

European consumers have been also delaying gas purchases since the start of the year, waiting for prices to finally catch up with lower oil prices and switching to alternative fuels or pumping gas from underground storage.

"Customers, being pressured by the global financial and economic crisis, have naturally reduced purchases as they know that gas prices will be lower in six months' time," he said.

"In the first quarter we have witnessed daily demand on the Western markets reaching 260-280 million cubic metres. It was 200-170 mcm lower than in the same period of 2008".

"But from April-May we have already seen a significant growth in consumption on Western markets. Today it is reaching as much as 430 million cubic metres (per day)," he said.

To read a story about Gazprom's May output see [ID:nL2214017] (Writing by Dmitry Zhdannikov, Editing by Anthony Barker) (moscow.newsroom@reuters.com, + 7 495 775 12 42) ($1=31.15 Rouble)

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