THE start of work on a giant gasfield in the Russian Arctic will be delayed because of cost and financing problems, according to Total, the French oil company, one of Gazprom's partner in the $US20 billion ($22bn) project.
The final investment decision for the Shtokman field, which will extract gas from beneath the Barents Sea, was to be taken in the next few months, but Arnaud Breuillac, Total's vice-president for exploration in Central Europe, said that the decision would not be taken until the end of next year.
"In the current conditions, it is absolutely normal that the project is taking more time than was initially planned. Projects on a scale such as Shtokman are coming up against difficulties in attracting finance," he said.
A collapse in the price of natural gas has put financial pressure on Gazprom and forced the company to delay investments. The start-up of another Siberian gas project, Bovanenko on the Yamal Peninsula, has been delayed until late 2012.
Gazprom had insisted that Shtokman, a project targeted at the lucrative European and American export markets, was a priority, but the economics appear to have gone awry.
"We are going through the tender process and given the current conditions we think costs could be reduced," a Total spokesman said.
Shtokman is among the world's biggest unexploited gasfields. With 100 trillion cubic feet in reserves it could supply Britain for 30 years, but the resource is remote.
The gasfield lies 500km northeast of Murmansk in the Barents Sea. Plagued by icebergs and too distant from shore for helicopters, the problem of building offshore platforms and laying pipelines has been a financial and logistical headache for Gazprom, Total and StatoilHydro, the third partner.
However, Shtokman is of great strategic importance for Gazprom, as the resource is earmarked for export to Northern Europe via Nordstream, the proposed Baltic Sea pipeline. Nordstream has strong support in Germany with an important investment by E.ON.
The first gas shipments along the pipe, which will link Russia directly to Germany, bypassing Poland, were expected in 2013.A second stage of the project envisages exports of liquefied natural gas (LNG) to America with the construction of a gas liquefaction plant in Murmansk by 2014.
Statoil and Gazprom signed a memorandum of understanding this month for the joint marketing of gas through Cove Point, a terminal in Maryland where Statoil has bought capacity.
However, the worldwide collapse in the price of natural gas has cast doubt on the timing of vast infrastructure projects such as Shotkman.Gazprom is in talks with its European utility customers over unsold volumes of fuel. Demand has fallen by almost 10 per cent and Gazprom's customers complain that the Russian export price, linked to the price of oil, is too high to stimulate demand.
Gazprom is resisting demands to renegotiate contracts linked to the price of oil. It fears that it will become exposed to short-term spot gas prices or emerging spot markets in Germany and Austria. It argues that without long-term price guarantees, it cannot finance projects such as Shtokman.
Source: http://www.perthnow.com.au/business/bn-arctic-gas-project-delayed/story-e6frg2r3-1225808936615
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