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Gazprom chooses Total as Shtokman gas field partner
By Stephen Boykewich
AFP
MOSCOW
Petroleumworld.com 07 13 07The Russian gas monopoly Gazprom chose French oil major Total on Thursday to help develop its giant Shtokman gas field, in an apparent breakthrough for troubled Russian-EU energy relations.
The fate of the massive field -- and which foreign partners might be chosen to help develop it -- has been a key question in Russia's energy relations with the West, which fears overdependence on Russia even as it scrambles to meet surging demand.
Total is to receive 25 percent of a joint company that will develop the project's first phase, while one or more other foreign companies may share an additional 24 percent, Gazprom CEO Alexei Miller said in a statement.
Gazprom will retain at least 51 percent of the company, plus total ownership of the development license and "all of the extracted hydrocarbons," Miller said.
The Shtokman field, located in the Russian section of the Barents Sea above the Arctic Circle, is one of the few known but untapped giant gas reserves in the world.
Its estimated 3.7 trillion cubic metres (130 trillion cubic feet) of gas could meet total world gas demand for one year.
The project's first phase will extract 23.7 billion cubic metres of gas for pipeline shipment starting in 2013, and shipment in liquid form by 2014, Miller said.
A Total spokesman in Paris confirmed news of the agreement, saying the company was "in very advanced discussions" with Gazprom over details of the partnership.
Shtokman's future grew cloudy in October when Gazprom made a surprise announcement that it had rejected its entire short-list of potential foreign partners in the project -- US Chevron and ConocoPhillips, Total and Norway's Hydro and Statoil -- and would develop the field alone.
Analysts said the massive costs and technical challenges of the deep-sea field would make it nearly impossible for Gazprom to do so.
"Gazprom needs all kinds of resources: human resources, financial resources and the experience of the Western majors," said Andrei Fedorov, an oil and gas analyst at Alfa Bank in Moscow. "It will cost at least 20 billion dollars to develop the field."
The decision to invite Total as a partner on the project marks a "significant easing of Gazprom's position," Federov said, while warning against reading too much into the move.
"It's just a change of tactic. There is no reason to think their long-term strategy has changed."
The choice of a French company appears significant, however, amid repeated clashes between Russia and the European Union over energy supplies.
European officials have warned against increasing reliance on Russian gas and Gazprom's expansion plans in Europe, while Moscow has threatened to form a gas cartel to increase its leverage in negotiations.
Al Breach, head of research for the investment bank UBS Warburg, called the deal "a major victory" for France and all of Europe.
"They don't own the reserves, but so what?" he said. The joint company "is the company that has the infrastructure and then will take the profit."
Shtokman is a major potential energy source for Europe and the United States, though the planned direction of shipments has also been unclear.
Gazprom initially said Shtokman gas would be shipped to the United States in liquefied form, but later said it would be shipped to Europe via a planned Russian-German pipeline under the Baltic Sea.
"I think critically it looks like this is going to be European partners, but not Americans," Breach sid. "It confirms a trend we're seeing where Russia is doing joint venture deals with a number of European concerns but not with the Americans."
AFP 12 1543 GMT 07 07Copyright© 2007 AFP. All Rights Reserved.
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