May 25, 2012 / 4:55 AM / 7 years ago

UPDATE 3-Putin tells Shtokman gas partners to hurry up

* Project has been in limbo over financing

* Statoil may leave consortium - source

* Shell may join project -sources

* Putin says partners should “move actively”

By Alexei Anishchuk and Vladimir Soldatkin

MOSCOW, May 25 (Reuters) - Russian President Vladimir Putin urged partners in the Gazprom-led Shtokman project to make a final investment decision on its plan to extract gas from the Arctic seabed, delayed by years of talks over financing.

Sources earlier on Friday said Royal Dutch Shell may join the initiative in an attempt to inject new life into the venture, while another source said the future participation of Norway’s Statoil is in doubt.

Located in the freezing and stormy waters of the Barents Sea, the Shtokman gas field is one of the world’s largest with enough gas to supply the whole world for a year.

However, the project has been mired in painstaking talks over billions of dollars of investment, timing and the make-up of the consortium. Its backers have been unable to reach a final decision to make investments that at the initial stage could total $15 billion.

“So far, there has been no final decision on Shtokman, but we have to move actively,” Putin said, speaking at his residence in Novo Ogaryovo, adding that a decision could be taken during an international economic forum in St Petersburg in June.

Putin is actively involved in Russia’s energy policy, the most significant sector for the oil-rich country, and is taking a close interest in Shtokman.

Gazprom’s chief executive Alexei Miller confirmed that new partners were being sought for the project, although he did not say if Shell would join.

Gazprom, the world’s largest gas producer, has a controlling stake of 51 percent in Shtokman which has reserves of almost 4 trillion cubic metres. Statoil owns 24 percent and France’s Total owns 25 percent.

A source close to the consortium said on Friday that Norway’s Statoil may leave.

“It looks like the Norwegians are looking to quit. They have just discovered their own Shtokman in their own waters,” said the source, referring to Norway’s own recent giant hydrocarbon discoveries.

However, Statoil’s CEO Helge Lund spoke of the significance of the field, saying it has “importance beyond the project itself”.

“Stockman is a pioneering project, the first of its kind in a very harsh environment,” said Lund. “It’s a big opportunity, but there’s also many challenges which we have to solve on the way.”

Analysts have long been sceptical about the economics of the project. Dark through the winter and too far offshore to be reachable by helicopter, it requires production platforms that can withstand 25-metre waves and icebergs of up to 1 million tonnes.

“Talks regarding Shell’s participation in Shtokman are under way ... There are different project configurations under discussion now but Gazprom will keep a 51 percent stake,” a source close to the consortium told Reuters on Friday.

NEW GAS WORLD

In the six to seven years since foreign partners grouped to agree to develop Shtokman, the market for gas has changed markedly.

“When the project was originally conceived the world was a very different place,” said Mark Henderson, energy specialist at Credit Suisse.

“We all thought gas demand was going to be substantially higher than it actually is and gas prices would be substantially higher than they actually are.”

Gas from Shtokman had been earmarked for the United States, but booming shale gas production forced the consortium to scrap its plans and look for other markets.

Sagging demand for gas in debt-stricken Europe, Gazprom’s key source of revenue, also caused Shtokman to consider dropping plans for pipeline gas.

Gazprom’s Miller said Gazprom could sign a deal on new basic conditions with Statoil on Shtokman in June, and that Shtokman would get tax breaks before a final investment decision.

Shtokman, located 550 km (340 miles) off the shores of Russia, still aims to begin gas deliveries to Europe via the Nord Stream pipeline in 2016 and start shipping gas which has been frozen to form a liquid (LNG) around the world from 2017.

Miller said on Friday the proportion of LNG production, which Russia has exempted from duty, would be increased. Analysts from energy consultancy Wood MacKenzie have said they see Shtokman as primarily an LNG project.

While some analysts say Statoil’s departure from the project is on the cards, industry sources say that Gazprom is increasingly dissatisfied with Total’s view of Shtokman’s future. The French major is also pushing another LNG project in Russia it is working on with Novatek in the Yamal peninsula.

Shell and Gazprom are already partners at Sakhalin-2, Russia’s sole LNG plant with annual capacity of 10 million tonnes.

Spokespeople at Shell and Shtokman Development AG declined to comment.

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