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Page added on February 10, 2010

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Shtokman gas project postponed

The Gazprom-led Shtokman Development Co, operator of a super-giant gas project in the Russian Arctic intended eventually to deliver fuel to Europe and the United States, announced on February 5 that investment decisions and field development were being postponed.

The investment decision for field work is being rescheduled from the end of 2010 to late 2011. Decisions on future gas exports by pipeline and in liquefied form (LNG) are being delayed until March and December 2011, respectively. The start of production for pipeline-delivered gas to Europe will be postponed from 2013 to 2016. The start of LNG production for export to the US is postponed from 2014 to 2017.
The joint venture includes Total of France and Norway’s Statoil as minority partners, alongside Gazprom, the Russian gas monopoly. The board of directors’ announcement alludes in

passing to “changing market trends, particularly regarding LNG” as a reason for delaying the Shtokman project.

From the joint venture’s inception in 2007, many outside observers had regarded the start of commercial production at Shtokman as unlikely to materialize before 2020, considering the physical and financial challenges to the project. Production costs were expected to raise the price of Shtokman gas exorbitantly. On top of those resilient challenges, the Shtokman project suddenly confronted in 2009 the expansion of globally traded LNG on both sides of the Atlantic, and the development of unconventional gas in the United States.

Thus, a decision to postpone the Shtokman project became unavoidable. If anything, the postponement’s timeframe as declared seems understated. The project may now be regarded as suspended, with a high likelihood of further postponements, given the long-term nature of ongoing market trends.

From Moscow’s standpoint, this means lower projections of the overall gas output for the coming decade.

Asia Times

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