Shtokman Delays Investment Decision Until March 2012

Oslo (Dow Jones Newswires), Dec. 29, 2011

Shtokman Development AG said Thursday it has decided to delay the final investment decision for the giant Shtokman gas project until the end of March 2012.

The project shareholders, Russian gas producer OAO Gazprom (GAZP.RS), Total SA (TOT) and Statoil ASA (STO), had previously targeted a final decision by the end of 2011. But discussions have been hung up after Total and Statoil pressed for tax breaks from Russian authorities.

The shareholders "consider that some additional time is required to achieve the necessary conditions to take the Final Investment Decision (FID)," Shtokman Development said in a statement following a board meeting on Thursday.

Development of the field, which was discovered in 1988 in the Barents Sea and which holds 3.9 trillion cubic meters of gas--or enough to supply world demand for one year--has already been delayed on two occasions.

Statoil spokesman Bard Glad-Pedersen said that progress has been good on the technical side over the last year, but that "there is still work outstanding on the commercial side" to make the project economically viable.

"With this decision, the partners will have more time to work on this and get more clarity on the fiscal framework for this pioneering offshore project," Glad-Pedersen said.

The first phase of the Barents Sea gas project Shtokman is being implemented by Shtokman Development AG. It was established in February 2008 and is controlled by Russian gas producer OAO Gazprom, with Total SA and Statoil ASA as minority shareholders.

Shtokman Development will own and operate the project infrastructure during phase 1, for a period of 25 years, according to the company's website. The production from Shtokman is to commence in 2016, and an LNG plant is scheduled to be commissioned in 2017. In phase 1, the Shtokman field is set to produce 23.7 billion cubic meters of natural gas per year.  

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