UPDATE 2-Gazprom calls time on Shtokman on costs overrun
* Gazprom official says partners agree that costs too high * Partners "collecting new data" on developing Shtokman * U.S. shale gas boom, weak demand in Europe hit Shtokman * Shell may join the project * Investment decision not expected before 2014 * Plan had been for Europe pipeline deliveries from 2016 By Andrew Callus STAVANGER, Norway, Aug 29 (Reuters) - Development of Russia's huge Shtokman gas field in the Barents Sea is on hold indefinitely, top shareholder Gazprom said on Wednesday, finally acknowledging the struggling project has been overtaken by events in the global gas market and needs a rethink. The project's failure is likely to be a blow for President Vladimir Putin's plans to speed up the development Russia's production of liquefied natural gas, super-cooled to a liquid state for worldwide export on tankers. Vsevolod Cherepanov, head of Gazprom's production department, said its partners in the project, France's Total and Norway's Statoil, agreed with the assessment that the project can not go ahead due to costs overrun. "All parties have come to the conclusion that the financing is too high to be able to do it for the time being," Cherepanov told a conference. The firms have been mired in talks for years over investment and other issues pertained to the development of the remote deposit, one of the world's largest with gas reserves of almost 4 trillion cubic metres. Gazprom has a 51 percent stake in the group, Total has 25 percent and Statoil has 24 percent. A spokesperson for Total declined to comment. STUMBLING BLOCKS Plans to develop Shtokman, 550 km (340 miles) offshore in the icy waters of the Russian sector of the Barents Sea, have been complicated by a shale gas revolution in the United States, which had been seen as a primary export market for Shtokman. Unwillingness by the Russian government, whose coffers are highly dependent on oil and gas sales, to cut taxation has also weighed on plans to launch the project. A slowing European economy has also hit demand for gas, prompting the Russian Economy Ministry to cut its overall gas export forecast for this year to 193 billion cubic metres (bcm) from an earlier projected 212 bcm. The Shtokman partners have postponed their investment decision several times and last month Statoil said it had written off around 2 billion crowns ($336.2 million) of investment and handed back shares in the project after investors failed to meet a deadline for an agreement. Statoil officials said they remained in talks over the project, while Total has indicated it remains interested it Shtokman. A Statoil's spokesman on Wednesday said the partners are still in talks over the project's future. "We have a direct dialogue with Gazprom and still believe that it should be possible to implement this project, but a number of factors needs to fall into place," Jannik Lindbaek said. "There are huge resources and interesting opportunities on Shtokman, but it requires an agreement on the commercial and technical aspects. This is what we are working on now." While they struggle to reach an agreement, including on commercial terms and a development option, Royal Dutch Shell was considering coming in as a partner for the venture, replacing one of the smaller shareholders. Cherepanov confirmed that Shell has expressed its interest, saying that it might also join along with a number of engineering companies. "That's a possibility," he said, adding that a final investment decision on the first phase of the project would now not come before 2014. He also said that one issue holding up the project was the need to find a liquefaction technique suitable for Arctic conditions, and the review whether to use floating or subsea equipment. The consortium in its present form was established in 2008 with a view to producing 23.7 billion cubic metres of natural gas per year. Gazprom had also previously tried to launch the project, without a success, teaming up with several partners, including Norsk Hydro, ConocoPhillips and Fortum, who eventually quit the project. Under current plans, Shtokman is due to begin pipeline deliveries to Europe via the Nord Stream pipeline in 2016 and start shipping more costly liquefied natural gas (LNG) from 2017. "We are collecting new data... We have extensive gas resources. We shouldn't take hasty decisions," Cherepanov said.
- Tweet this
- Share this
- Digg this