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Development date could slip to 2020 Gas prices, project expense, politics could delay startup of Russia’s Shtokman Arctic gas field in Barents Sea Ray Tyson For Petroleum News
Russia could delay or constrain gas development in its portion of the Barents Sea due to the high cost of Arctic development and possibly to help drive up the price of its liquefied natural gas exports, Rice University economics professor Peter Hartley said May 3 at the Offshore Technology Conference in Houston, Texas.
Hartley said it could be 2020 before Russia’s giant Shtokman gas field in the Barents Sea comes on stream, vs. prior estimates of 2011 to 2015.
“Geological and economic fundamentals mean that Barents Sea natural gas and its use as LNG is a longer term prospect anyway,” Hartley said in an interview. “And it’s very expensive … and there are a lot of alternatives out there from around the world – not just LNG, but pipeline gas.”
For the most part, Hartley and other members of a panel invited to OTC to discuss offshore opportunities in Russia took a dim view of the country’s oil and gas politics, noting everything from Russia’s convoluted tax regime to limiting foreign involvement in projects, including Shtokman.
Companies waiting to hear on participation Norway’s Statoil, which operates the Snohvit gas project in the Norwegian sector of the Barents Sea, along with ConocoPhillips, Chevron, Total and Norsk Hydro, are hoping to hear soon from Russia’s Gazprom whether they’ve been selected to participate in Shtokman.
“They are either going to announce the companies shortly, or they are going to keep delaying,” panel member Julia Nanay, senior director of PFC Energy’s Country Strategies Group, said on the OTC sidelines.
Russia is holding its offshore “hostage to bureaucratic infighting” over proposed industry regulations and taxes that likely would be applied to Shtokman, as well as other offshore regions in the country, Nanay said.
“In order to develop the offshore … you’re going to have to have some action on the part of the Russian government,” she explained. “That’s what is being held hostage” because of the infighting.
Invited but conspicuously absent from the OTC panel was Sergey Feodorov, director of the Department for State Policy and Regulation of Natural Resources, Ministry of Natural Resources of the Russian Federation.
Statoil a leading candidate Meanwhile, Norwegian participation in Shtokman and an unresolved boundary dispute between Norway and Russia in the Barents Sea are expected to be key themes discussed later in May when Russian Prime Minister Mikhail Fradkov makes an official visit to Norway.
“As for the Russians, my bet is that I just never know,” Nanay said. “They never come to a conclusion on anything in the timeframe that you expect. Obviously, with Shtokman, they are going to need more company involvement, but do they delay it because they are busy with other things. What you get in Russia are these constant uncertainties.”
Despite all the question marks in Russia, Norwegian national oil company Statoil appears to be a leading candidate to participate in the Shtokman gas project.
“I think the Norwegians are going to have a role,” Nanay said. “It’s a natural for them. They are right there in the Barents Sea, and I think there are too many reasons to have them work together.”
Nanay also believes Russia and Norway ultimately will resolve their Barents Sea boundary dispute. “I don’t know how or when, but it’s just too important an area to leave undeveloped,” she said.
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