The Shtokman Development AG consortium announced on February 5 that it will delay the startup of the Arctic gas project. Natural gas will begin flowing to Europe in 2016.

Liquefied natural gas (LNG) will start in 2017. It a delay of about 3
years. A final pipeline decision will be made in March of 2011 and an
LNG plant decision by the end of that year. Total and Statoil are part
of the consortium. Experts have questioned Gazprom’s financial and
technical ability to complete the project.

Analysis

Shtokman was discovered in 1988 but delineation drilling only began
during 1990-95. Five wells indicated that the field contained 3.8
trillion cubic meters of gas and 31 million tons of condensate. The
difficulty lies in the 555 kilometers of icy sea between the field and
Murmansk. This is compounded by water depths of 350 meters.
Nevertheless, in the autumn of 2006 Alexi Miller, CEO of Gazprom,?
surprised the industry by announcing that? foreign oil companies would
be excluded for participation? because they could not possibly provide
the capital. But after further contemplation it was decided to offer
participation to Total (France) and Statoil Hydro (now Statoil). Norsk
Hydro, had drilled one of the delineation? wells for Gazprom in the
1990s and more recently split off its oil and gas division and merged
it into Statoil. Thus Statoil was a logical candidate for the
consortium. Total too has had experience in severe subzero temperatures
and general severe conditions. It also has plenty of capital. Thus the
choice of participants had considerable logic behind it. To develop the
huge field, two Arctic service semisubmersibles are under construction
at a shipyard near Vyborg. Doris Engineering and Russia’s Central
Design Bureau of Marine Engineering began studies in September of 2007.
The first production facility design was based on the use of a spar but
pack ice and roving icebergs convinced the planners that a huge
floating production unit was the correct solution. This unit will have
to be in compliance with the requirements of the Russian Maritime
Register of Shipping. By late 2009, estimates of the size of the unit
were complete but much design work remains. Had the world not been
shaken by the Financial Crisis of 2007-2008 (and still the dominant
constraint on planning), natural gas consumption in Europe would have
continued its steady upward trajectory and new supplies from Russia
would have been required as early as 2014. But that condition has
softened.? Another complicating factor is that the Nord Stream
pipeline, when completed, will run beneath the Baltic Sea is also
delayed. This combination of factors forms the backdrop for the
announced delay and it may not be the last.

Source: RigZone

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