MOSCOW - Russian state-controlled gas company OAO Gazprom has indefinitely postponed development of its giant Shtokman gas field, the latest delay to its years-long efforts to tap the Arctic field with France's Total SA and Norway's Statoil ASA.
The decision comes after disagreements between the companies over investment terms have repeatedly stalled development of the field, located in the challenging Arctic environment of Russia's Barents Sea and estimated to hold almost 4 trillion cubic meters of gas.
"All parties have come to the conclusion that financing is too high to be able to do it for the time being," said Vsevolod Cherepanov, head of Gazprom's production department, through a spokesman. "We are collecting new data. We have extensive gas resources. We shouldn't take hasty decisions."
The viability of the project has been dented in recent years by the shale gas revolution in the U.S., originally considered an export market for its gas. Gazprom is also facing challenges to exports to its main market in Europe from flagging demand and the growth of liquefied natural gas. The Economy Ministry said Tuesday it sees "serious" risks posed by shale gas to Gazprom's revenue beginning in 2014, as higher supply from the nontraditional hydrocarbons may hurt prices and demand for its pipeline gas.
The company is also losing its share of the domestic market to independent producers such as OAO Novatek, which on Monday announced a $22 billion deal to supply gas to E.ON Russia for 15 years, replacing Gazprom. Analysts say Novatek--co-owned by billionaire oil trader Gennady Timchenko--could soon be allowed to challenge Gazprom's monopoly on gas exports. Novatek is planning to develop its own Arctic project on the Yamal peninsula to produce LNG with Total.
Gazprom officials had said in July that talks on Shtokman would be completed by the autumn.
Statoil, which held a 24% stake in the project, said earlier this month it had written off around $340 million of investment and returned its stake but is still mulling participation. Total--which holds 25%--has said it is still interested in the project. Gazprom has 51%.
Copyright (c) 2012 Dow Jones & Company, Inc.
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