* Progress is success for partner Shell
* Gazprom head of export acknowledges Shell talks on
* Putin has urged Gazprom to push ahead with LNG strategy
By Vladimir Soldatkin and Melissa Akin
MOSCOW, June 29 Gazprom said it had agreed to a
feasibility study to expand Russia's only liquefied natural gas
plant, a victory for its partner Royal Dutch Shell,
which has urged the state-run gas monopoly to seize a market
opportunity in the Pacific.
Chief Executive Alexei Miller told a news conference on
Friday that Gazprom would do a preliminary front-end engineering
and design (pre-FEED) study on expanding the plant, on the
Pacific island of Sakhalin, from 10 million tonnes of
super-cooled liquefied natural gas per year to 15 million.
Miller said it would be finished by the end of the year. He
also said Gazprom was no longer considering a pipeline to Tokyo,
which in theory could have siphoned gas away from an expanded
Sakhalin-2, and would consider only LNG sales to Japan.
Executives from the Anglo-Dutch major have argued that
Sakhalin was best positioned to increase supply to Japan after
the Fukushima nu clear di saster, while the battle for market
share in Asia would grow fiercer with time.
The project currently sells much of its output to Japan and
ramped up volumes to meet additional Japanese demand when
nuclear capacity was shut down after Fukushima.
Australia alone is planning nearly 60 million tonnes of new
capacity between now and 2017, with plans for another 13 million
tonnes due to be finalised this year.
If Shell takes a stake in the troubled Shtokman project in
the Barents Sea in the Arctic, s houldering some risks in an
scheme w hose costs are so high as to make it almost certainly
unprofitable, it could ease a longstanding headache for Gazprom.
Gazprom's head of export acknowledged there were talks with
Shell on Shtokman b ut said they were not linked to progress on
"They are not connected," Alexander Medvedev told reporters
after the company's annual meeting in Moscow.
The Kremlin is unwilling to permit failure of the flagship
project to develop the giant Shtokman field, which holds more
gas than the entire Norwegian continental shelf under the floor
of the Barents Sea, but the sheer expense of the project has
threatened its future.
Liquefied natural gas has become a political priority for
Russia, the world's largest conventional gas producer, which has
remained dependent on pipelines to deliver its gas to Europe,
its main export market and source of revenue, while rivals such
as Norway and Qatar have pressed ahead with seaborne LNG.
Earlier this year Russian president Vladimir Putin ordered
the giant gas company to push ahead with an LNG strategy.
Russian companies have a total of up to 60 million tonnes of new
LNG capacity on the drawing board.
Miller told a news conference he did not rule out a third
partner for the Shtokman consortium and said a new framework
agreement among the partners could be signed next week to
replace the one due to expire on Sunday.
The consortium already includes Statoil and Total
Sources have said Gazprom would lose marketing rights to
Shtokman gas under the new agreement. Miller said that was
untrue and Gazprom, the state export monopoly, would have full
He said Shtokman would be developed before Yamal LNG,
independent gas producer Novatek's rival project to
produce the liquid fuel from an field on the Arctic Yamal
peninsula. Total is also a partner in Yamal LNG.