Interview: Gazprom to triple Shtokman gas output by 2020

Yuri Komarov, head of Shtokman Development AG, said the Russian field -- one of the world’s biggest offshore gas projects -- could eventually quadruple annual output from an initial 23.7 billion cubic meters (bcm) if enough gas is discovered. “We plan to launch phases every four years, so the second phase should start in 2016 and by 2020 we should have developed all three phases,” said Komarov, whose company is majority controlled by Russian gas export monopoly Gazprom.

Each stage would add 23.7 bcm per year of gas output. “Thus, total annual output is set to reach around 47 bcm by 2016 and further increase to 71 bcm by 2020,” Komarov said in an interview. Gazprom controls 51% of Shtokman Development AG, set up this year to develop the first stage of the field. France’s Total and Norway’s StatoilHydro hold 25% and 24% respectively. Gazprom plans to develop Shtokman, which will supply the West with pipeline and liquefied natural gas (LNG), in three phases and may add a fourth if enough gas is found. Komarov said the third stage of the project was expected to produce only LNG.

Located deep in the stormy Barents Sea in the Arctic, the Shtokman deposit carries 3.8 trillion of cubic meters of gas reserves -- enough to supply the world for more than a year, according to BP’s annual energy statistics review. Gazprom, the world’s largest gas producer, has until recently extracted its gas from onshore deposits. It is relying on Western technology to develop its first offshore projects, such as Shtokman and Pacific island deposits.

CONSTARCTORS

Shtokman Development AG this month picked France’s Technip and DORIS Engineering, Britain’s JP Kenny and two Russian engineering firms to do the FEED (Front-End Engineering Design) for the project’s first stage. The operating company plans to start choosing other contractors -- to build a sea pipeline, a platform and an LNG plant in the village of Teriberka in the Murmansk region -- at the end of this year. “For us, September 2009 is a key point. By that time we plan to have held all the tenders and to make the final investment decision,” Komarov said.

Gazprom has initially estimated the cost of the first stage at $15 billion. “The number of candidates is limited, because the business is unique, but it is still possible to organize competition between several serious companies,” he added. He said Norwegian companies, which have experience in developing offshore Arctic projects, had a good chance of participating, as well as some French and Italian firms. “There is a common rule in business: never say never. Everything depends on terms, potential interest and whether it is economically attractive,” he said. “If our industry manages to develop its capacities, it would be optimal. But if some capacities are not sufficiently developed, we would need to attract international potential.”

The Shtokman project is expected to start pumping natural gas by 2013, while LNG deliveries are seen starting in 2014. “We all understand fairly well that the terms are really tough. But the participants are very strong and serious. This is one of the best teams possible for projects like this,” he said. Komarov, former chief of Gazprom’s exports operations, said the gas giant, which already supplies Europe with a quarter of its gas needs, can become a key player in the global market if its succeeds with its LNG projects. “LNG has a very important advantage. It is a so-called flexible pipeline, where you can switch flows to different directions depending on demand and prices,” he said. (Reuters)