Gazprom has announced that it will be delaying the start up of its Shtokman gas field by a further three years. It is now set to begin 16 years later than initially planned, due to ongoing financing problems. The gas field is situated beneath the Barents Sea, 600 km northeast of Murmansk, in an extremely hostile environment. It is estimated to hold approximately 3.8 trillion m³ of gas, and the project will see an annual production of 70 billion m³ of gas once underway. Its first phase is set to require approximately US$ 15 billion of investment. The project to develop the field is a joint venture between Gazprom (51%), Total and Statoil.
Project developments have been pushed back largely due to changes in the LNG market globally. Initially, Gazprom had intended to convert and ship the gas from Shtokman as LNG to the USA, but instead chose European firms as partners. Since then, Gazprom has announced that only half the gas recovered will be exported as LNG – the rest will be pipeline gas. A final investment decision on LNG will be reached before the end of next year, and LNG output is set to begin in 2017.
The surge in unconventional gas supplies derived from shale gas in the USA coupled with increased LNG supply led to a slump in Russian gas exports last year, and caused many LNG tankers to head for Europe. Spot European gas market prices were driven below oil-indexed Russian prices by the extra supply, and Gazprom’s customers consumed small amounts of Russian gas in order to take advantage of cheaper LNG. Moving forward, the competition will focus on Europe and Asia, as the USA is unlikely to require the LNG even by 2025. Gazprom expects consumption will return to normal over the long term.
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