MOSCOW (Dow Jones Newswires), Feb. 17, 2011
The giant Shtokman gas project in Russian Arctic waters faces new delays due to low gas demand and disagreements between shareholders over the project's design, government and company officials said Thursday.
The project's architects had planned to take a final investment decision in March. But on Thursday, an executive with Shtokman Development AG confirmed that the timeframe would shift until later in 2011 to green light a project that has already been significantly pushed back.
The latest delay comes as industry observers forecast a gas glut hitting global markets in the next few years, due to weakened demand in Europe, new supplies of liquefied natural gas, or LNG, and a shale gas boom in the U.S.
The Shtokman offshore field--a joint project controlled by Russian state gas giant Gazprom with France's Total and Norway's Statoil as minority shareholders--is a technically challenging project located in icy waters in the Barents Sea around 500 kilometers north of Murmansk.
With reserves of 3.9 trillion cubic meters around 53 million tons of gas condensate, Shtokman has enough gas to meet worldwide demand for a year.
An original plan envisioned deliveries of pipeline gas from Shtokman in 2013 and LNG by 2014. But one year ago, the project was delayed three years due to "changes in the market situation and particularly in the LNG market," the three shareholders said then.
Now Russia is considering delaying the project again, the deputy head of the Natural Resource Ministry's Subsoil Agency, Pyotr Sadovnik, told a government meeting Thursday, state news agencies reported.
"This situation has arisen because the United States is actively using shale gas and demand for gas is falling accordingly," Sadovnik said, adding that a final decision has not yet been made.
In 2009, the United States overtook Russia as the world's biggest producer of natural gas, as shale gas--employing technologies that allows producers to extract reserves that were previously unrecoverable through the use of sophisticated fracturing techniques--transformed the U.S. gas market.
As a consequence, a wave of liquefied natural gas rerouted from the U.S. flooded the European markets, creating oversupply for gas in Russia's main gas export market.
Meanwhile, continued disagreements between the Shtokman shareholders over the design of the project have still not been resolved, and a final investment decision on the project will be pushed from March to later this year, vice president of Shtokman Development AG, Andre Goffart, said Thursday at a conference in Moscow.
Goffart declined to say for how long it could be delayed, but an industry source involved in the project told Dow Jones Newswires it is unrealistic to make a final investment decision before July due to a tight timeline.
The consortium originally planned to ship the mixture of natural gas and condensate gas from the offshore production site through two undersea pipelines to the shore. But last year, Gazprom said it would be cheaper to install a floating vessel to separate the gas and condensate before it is sent to shore through two different pipelines.
The consortium has already received bids from contractors for the original design. But should Gazprom's proposal be accepted, the project will be delayed at least one year, because it will take time to get bids ready for the new design, said Goffart, who is also a vice president at Total.
Copyright (c) 2011 Dow Jones & Company, Inc.
Most Popular Articles
From the Career Center
Jobs that may interest you