UPDATE 1-Gazprom says on track for year-end launch of Arctic field

Thu Oct 3, 2013 5:14am EDT

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* Greenpeace activists staged protests at offshore site

* Project has been hit by several delays

MOSCOW Oct 3 (Reuters) - Gazprom has announced that it is on track to begin oil production this year at the Prirazlomnoye Arctic oil project that has ignited protests from environmental groups over the dangers of possible oil spills.

"As was envisaged, production is expected to start by the year-end," Gazprom Neft Shelf, a unit of Gazprom, said in an email to Reuters - the first public remarks by the company since Greenpeace activists tried to scale the production platform at Russia's first Arctic offshore oil project last month.

On Wednesday Russia charged Greenpeace activists with piracy for their demonstration against Arctic oil drilling, which the Kremlin sees as a key to Russia's future prosperity.

Arctic offshore oil and gas development is crucial for Russia, which relies on hydrocarbon sales for more than half its budget revenue. The Ministry of Natural Resources puts the offshore oil resources at 100 billion tonnes, which would be enough to satisfy global demand for 25 years at current consumption levels.

State-controlled Rosneft, Russia's top oil producer, has agreements with ExxonMobil, Eni and Statoil to tap the Arctic deposits. But those project are unlikely to eke out any oil and gas before the 2020s.

Gazprom has cited "technical reasons" for several delays to the start of production at Prirazlomnoye, which is designed to produce heavy, sour oil. Media reports have estimated total investment in the field, discovered towards the end of the Soviet Union, at between $4 billion and $5 billion.

Prirazlomnoye has estimated reserves of 526 million barrels of oil and Gazprom expects to reach peak production of 120,000 barrels per day in seven to eight years.

Concerns over the safety of offshore oil have intensified after BP's Deepwater Horizon oil rig exploded in 2010, killing 11 workers and spewing millions barrels of oil into the Mexican Gulf, though Gazprom said on Thursday that it is able to tackle any possible oil spills at Prirazlomnoye.

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