ST. PETERSBURG, Russia - The three shareholders in a giant natural gas project in the Barents Sea have yet to resolve a number of issues before a final investment decision on the complex development can be taken, Statoil SA Chief Executive Helge Lund said.
"As you know, Shtokman has had issues related to commerciality and profitability, but we are working on that," said Mr. Lund. "The parties still have some ground to cover."
The Norwegian state-owned oil firm, along with project partners Total SA and Russia's OAO Gazprom were expected to use the St. Petersburg Economic Forum here to make the call on whether to commit billions of dollars to develop Shtokman.
One of the world's biggest gas fields, Shtokman's hydrocarbon bounty is located in an extremely challenging Arctic environment in Russia's Barents sea. The field was discovered more than 20 years ago, but the tremendous technical and cost challenges mean that no project to tap the resources have ever been realized.
The complexity of Shtokman and the emergence of the U.S. as a potential gas exporter has prompted many analysts to question the financial viability of the development, fueling rumors that the whole project is now endangered.
Gazprom Chief Executive Alexei Miller announced earlier this week that the partners would hold fresh discussions at the forum. "The discussions will generate new agreements, which will replace the old ones, which are only in effect until July 1."
Speculation has swirled in recent months that Statoil is seeking to leave the long-delayed project in favor of other opportunities that offer better profit margins. The partners had been expected to give the project the final go-ahead before the end of 2011. However, they decided at a year-end meeting to move back the deadline to the end of the first quarter of 2012. Both Total and Statoil continue to await Russian government approval of the substantial tax breaks they say are needed to ensure the project is viable.
Mr. Lund's comments were in stark contrast to sentiments exposed by Total Chief Executive Christophe de Margerie, who struck a far more upbeat note Thursday.
Although de Margerie confirmed the partners were seeking to renegotiate the agreement's original terms, he said Total was happy with its 25% stake in the project. State-controlled Gazprom is the majority shareholder, with a 51% interest in the project vehicle, Shtokman Development AG, while Statoil holds 24%.
Gazprom vice chairman Alexander Medvedev surprised Total and Statoil earlier this month by saying his company was considering finding new partners for the venture, while local media reports Thursday suggested Royal Dutch Shell PLC may join the project.
A Shell spokeswomen declined to comment.
Both Mr. Lund and Mr. de Margerie said a new agreement was unlikely to come at the forum, which ends Saturday, tomorrow. But while Mr. de Margerie said he was optimistic a deal would be reached in a matter of days, Mr. Lund was a little more circumspect. When asked whether he concurred with Mr. de Margerie's assessment that an accord could come by the end of June, he said: "I don't expect an agreement today, but we are working hard to come to a resolution. [The end of June] is a natural next milestone, part of the [original] Shtokman framework agreement."
Copyright (c) 2012 Dow Jones & Company, Inc.
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