Shtokman Decision Approaches

A decision on the status of the multibillion-dollar project Shtokman natural gas project is to be taken prior to the end of 2011.

Gazprom is to meet with its partners in the proposed project, Total and Statoil, to decide on proceeding with the first phase of the project which would require an investment of 15 billion dollars.

Total and Statoil hold 25% and 24% interest respectively in Shtokman Development Company, the operating joint venture of the Barents Sea field, whose gas field’s account for approximately 3.9 trillion cubic metres of natural gas and more than 37 million tons of gas condensates.

Gas from the gas condensate field located 650 kilometers north of Murmansk will be piped to European consumers and shipped on tankers to global markets as liquefied natural gas.

La Tribune reported that Total and Statoil would be required to commit to a payment of $1.5 billion or leave the project. The paper did not make clear whether this sum would come from both companies or from each company.

The project faces hurdles beyond the vast capital commitments required.

Jan Helge Skogen, Head of Statoil Russia, recently said the shale gas revolution in the US has had an enormous impact on the global gas and LNG industries, placing in question the economic relevance of Shtokman.

The project partners have also been awaiting for a yet to be clarified tax regime to be put in place in form of discounted rates of mineral extraction tax and gas export duty.

Recent events in the Arctic, including the loss of the drilling platform Kolskaia in the Sea of ​​Okhotsk, have also heightened the awareness of operating risks in the region, particularly as no infrastructure is in place.