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Russian gas switch could hit Conoco and Chevron
Russia's plan to divert up to half the gas from its vast Shtokman field to Europe and away from the United States is bad news for US companies Chevron and Conoco-Phillips, analysts said yesterday.
- Reuters
- Published: 00:00 September 26, 2006
Moscow: Russia's plan to divert up to half the gas from its vast Shtokman field to Europe and away from the United States is bad news for US companies Chevron and Conoco-Phillips, analysts said yesterday.
President Vladimir Putin said on Saturday that Russia might sell Europe 25-45 billion cubic metres of gas a year from the offshore field, out of its planned output of 70 bcm a year.
That would add 15-30 per cent to Russia's current gas supplies to Europe, going a long way towards satisfying an expected surge in European demand for the fuel. An increase of 45 bcm would be equivalent to doubling supplies to Germany, Gazprom's biggest customer, which last year used 39.9 bcm.
Previously Russian gas monopoly Gazprom had said it wanted to liquefy almost all of the gas for shipment to the United States, where it wanted to grab 10 per cent of the market by 2010 and 20 per cent later.
Although enormous, with gas reserves of around 3.7 trillion cubic metres, Shtokman is an extremely challenging prospect, since it lies out of helicopter range in the Arctic Barents Sea, where million-tonne icebergs drift through stormy seas.
Gazprom has shortlisted five companies to help it develop the field. In addition to Conoco and Chevron, the list includes French oil major Total and Norway's Statoil and Norsk Hydro.
"If Gazprom decides to prioritise Europe as the key market for the field's gas, European companies such as Norsk Hydro, Statoil and Total would have a better chance of participating while US companies ConocoPhillips and Chev-ron may be left out of the project," analysts at Deutsche UFG said in written research.
Gazprom has said it will only take two or three partners in the final line-up for the project, which is likely to cost more than $20 billion and could pump gas for up to 70 years.
Partners
Gazprom has repeatedly delayed the announcement of its choice of partners, each of whom has tried to win the state gas firm's favour by offering it stakes in their own projects.
Analysts say Moscow has used the bidding process as a bargaining chip in its talks with Washington on Russia's attempt to join the World Trade Organisation.
"If Russia does not succeed in these talks, the chances that the list of partners in the Shtokmanovskoye project will include only European companies is very high, in our view." Troika Dialog brokerage said.
Vedomosti business newspaper quoted a source close to the firm as saying Putin's comments were a surprise for management and represented "big politics".
Analysts at Aton Capital said the remarks confirmed the widely-held view that Gazprom was heavily politicised, but added that the monopoly could take advantage of the situation to win guarantees of high demand and promises of better market access.
Gazprom has repeately said it wants to buy assets further down the European value chain, so that it is involved at every stage from drilling the wells to providing gas and power for European consumers.
Gazprom declined to comment yesterday.
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