Gazprom has been firmly decided on the parallel development of the two huge and unique Arctic projects. While the Bovanenkovo field development is projected completed in 2011, the Shtokman field is to be in production in 2013.
Analysts have long speculated over Gazprom’s ambitious development plans. Even under normal circumstances, they argue, the time schedules in the two prestige projects might be too tight. In today’s financial situation, the fulfilment of the plans has become far harder.
Insuficient capacity
Gazprom is already using a major part of its investments on the Yamal Peninsula. From where is Gazprom going to get additional money for the Shtokman development? As BarentsObserver reported last week, the economy of the company is already strained, which was illustrated by the company’s request to the federal government for the funding of a 100 billion RUB investment in its electricity units.
Leader of the Shtokman Development Company Yuri Komarov last week confirmed that about 70 percent of the Shtokman investments will come from credits. With an estimated 15 billion USD of investments in the first field development phase, that leaves the company highly dependent of lenders.
Mr. Komarov said he expects “serious contributions” from project partners Total and StatoilHydro. However, these companies themselves are suffering from the financial turmoil and are unlikely to save the Shtokman project unless they get more in return.
Yamal first
Gazprom is a champion on the laying of pipelines and developing land-based fields, but has little experience from developing huge offshore fields. That might make the company choose Yamal as priority number one.
Gazprom is reportedly already well underway with the development of the biggest of the fields in Yamal, the Bovanenkovo field. Thanks to this field alone, Gazprom will according to plans be able to increase annual gas production with 115 billion cubic meters. When the whole peninsula is developed, regional gas production will boost to a projected 250 billion cubic meters.
Then Shtokman
While the development of the Bovanenkovo field is progressing, no actual construction works have yet started in the Shtokman project. There are still no signs of the planned railway line, roads and other infrastructure. The project final investment decision is to be taken in fall 2009.
In a presentation in the Norwegian Barents Secretariat in Kirkenes, Norway, this week, Norwegian oil and gas analyst Johan Petter Barlindhaug indicated that the Shtokman project will need new contract terms between partners Gazprom, Total and StatoilHydro if project time schedules are to be met.
Mr. Barlindhaug also indicated that the Shtokman partners could face serious challenges in the planned Shtokman hub of Teriberka, which he believes is unsuited for LNG operations.
In his meeting with the press last week, Shtokman development company leader Komarov stated that oil prices of a minimum of 50-60 USD per barrel is necessary for the Shtokman project’s wellbeing. As oil prices today have dropped below 40 USD per barrel and the world economic crisis is reaching new lows, that statement is a signal strong enough.
BarentsObserver editorial, 12 December 2008
