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Oil and Gas

UPDATE 2-Petro-Canada eyes Yamal in asset swap with Gazprom

(Adds Gazprom, Petro-Canada on Baltic LNG after para 8)

MOSCOW, Nov 20 (Reuters) - Petro-Canada PCA.TO may swap assets with Russia's gas export monopoly Gazprom GAZP.MM as it wants to get a foothold in Russia's Arctic Yamal peninsula, an executive from the Canadian company said on Tuesday.

“We would consider asset swaps to develop upstream opportunities in Yamal,” the firm’s vice-president for business development, Graham Lyon, told reporters on the sidelines of a Moscow gas conference.

Heavy oil assets were Petro-Canada’s potentially swappable assets, he said.

Gazprom holds most of the gas reserves on Yamal and has previously said it will not invite foreign investment to develop the fields.

But Royal Dutch Shell RDSa.L's CEO Jeroen van der Veer told Reuters earlier in the month it was looking to explore a huge-scale project there, while market sources at the conference said BP BP.L was also looking at Yamal.

“Petro-Canada is relatively small compared to Shell or BP, so we probably won’t be picked (for Yamal),” Lyon said.

“But we are willing to invest in Russia, and are also looking at opportunities in West Siberia and the shelf,” he added.

Industry analysts say Yamal’s development will dwarf Shtokman, another giant deposit, located in the stormy Barents Sea. Yamal holds around one third of Gazprom’s reserves, or more than 10 trillion cubic metres.

BALTIC LNG

Gazprom is also talking to Petro-Canada as one of the main potential participants in the $3.5 billion project to build a liquefied natural gas plant on the Baltic Sea in the St. Petersburg area.

“I feel the project has all the marks of economic efficiency... It will be looked at in December and a decision will then be made,” Gazprom’s deputy chief executive Alexander Medvedev told a news briefing at the same conference.

The plant will have an annual capacity of 5 million tonnes and will be 51 percent owned by Gazprom and built by 2013.

Apart from Petro-Canada, Gazprom's officials have mentioned BP BP.L, Itay's Eni ENI.MI, Japan's Mitsui and Co 8031.T and Mitsubishi Corp 8058.T, Spain's Iberdrola IBE.MC and a Malaysian firm as potential partners for Baltic LNG.

Petro-Canada hopes to secure a supply deal for its $1 billion Gros-Cacouna regassification plant, on an island in Quebec’s St. Lawrence River.

Gros-Cacouna will have a capacity of 3.6 million tonnes per year of LNG, with a possibility to double this in the future, and will be built by 2011 to supply Quebec, Ontario and the Northeastern United States.

“If we can get the 3.6 million all from Baltic LNG we’ll be very happy,” Lyon said. Should the Gazprom deal fail, however, Petro-Canada have lined up other potential partners.

"We are having serious negotiations with Australians, the company Woodside Energy Ltd WPL.AX, and are in negotiations with others," Lyon said.

The North American capacity for LNG will increase to 80 million tonnes per year by 2015, he said, and Petro-Canada is also looking at future supply deals with Algeria and Trinidad.

While LNG is considered more costly than piping gas, Lyon noted shipping LNG on tankers becomes cheaper after 2,500 kilometres, making it attractive for the North American market. (Reporting by Amie Ferris-Rotman)

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