Russ Oil-Gas

April 2006 The Kommersant The President of Chevron Global Gas hopes for Stockman
Kommersant has learned that the American Chevron sent Gazprom the final version of its proposal for participating in the development of the Stockman natural gas deposit on Monday. Just before that, Kommersant correspondent Mikhail Zygar talked to Chevron Global Gas president John Gass and learned what Chevron hopes to gain from cooperation with Gazprom. What share of Stockman counting on receiving and what is your company prepared to give in return? Negotiations with Gazprom are continuing and we cannot divulge the details of our commercial proposal. Nonetheless, I can say that partnership with Chevron in the field of liquefied natural gas will not only give Gazprom access to one of the biggest target markets, the United States, but will also help it become one of the leaders on the world energy market. To realize the commercial potential of its tremendous existing resource base, Gazprom must take part in all stages of the production and economic chain, from producing gas to supplying it to the end consumer. Gazprom is the world largest company by size of reserves, production and sales of gas. But development has so far come through supplies of natural gas to consumers in Russia, the CIS and Western Europe, since supplies to other countries of the world were naturally held up because of the existing transport infrastructure. Gazprom can change that situation by beginning to produce LNG.
How interesting will you proposal be to Gazprom?
Chevron has a unique capacity to cooperate with Gazprom in creating a profitable global business based on LNG from the Stockman deposit. I am referring to the experience Chevron has with all stages of the LNG economic chain, including production, sea transport, regasification, pipeline transport, storage, trading and sales. We want our partnership relations with Gazprom to develop long with the growth of that business.
How?
In the long-term, Gazprom could receive direct access to the industrial consumers of North America by using our company's broad network of trunk lines and distribution pipelines and storage facilities.
Can Chevron be helpful to Gazprom in developing the Stockman deposit, considering that it is on the continental shelf of the Barents Sea in the Arctic?
We have rich experience with shallow- and deep-water oil and gas production on the se shelf, including in the Arctic. Chevron recently used advanced shelf development technology to set a record for the depth of the drilling of a well at sea. We drilled the well to a total depth of more than 10 km. in seas more than a kilometer deep. We share our experience with our partners and use it in all of our projects to ensure maximal effectiveness and profitability in developing deposits in various countries of the world. That ensures optimal coordination between the transport logistics and sales divisions to take advantage of existing commercial opportunities. In 2005, the Chevron Shipping Co. organized about 2000 tanker voyages with both oil and LNG.
What volume of Russian natural gas is Chevron prepared to buy? Is there a shortage of natural gas in the United States?
In comparison with other fuels, gas consumption is growing worldwide at a rapid pace, about 2 percent per year. The volume of gas consumption in the U.S. today exceeds its domestic production. Last year the share of imported gas was 18.5 percent of the total volume, while it was only 6 percent of the total volume in 2002. The volume of LNG imported to North America is forecast to rise as domestic production stabilizes and then falls as consumption rises, mainly due to electricity generating companies. Research done by the U.S. National Petroleum Council in 2003 indicates that, by 2020, there will be a sixfold increase in the volume of LNG imported to the U.S. Chevron and Gazprom can become one of the world's largest suppliers of LNG, in proportion to its partnership relations at the later stages of the development of the Stockman deposit and the production of LNG, and potentially the largest supplier of LNG on the American market. We are counting on LNG from the Stockman deposit providing about 8 percent of the predicted import to the U.S. at the initial stage.
World natural gas prices are continually rising. What is the price for it on the U.S. domestic market and how will that price change?
As of March 6, prices on spot contracts for supplying gas to the Henry Hub [the transport system on the shore of the Gulf of Mexico that receives gas from 40 deposits] was $227.50 per 1000 cu. m. No one can predict the price dynamics exactly, but based on supply and demand in the U.S., we expect prices to remain on high. The main thing for Chevron is the ability to find and implement LNG projects to ensure good economic indicators for the next 30 years or so. But we understand that, in the course of that time, market prices for gas will fluctuate. The production of LNG is one means of increasing supply and gas from the Stockman deposit can pay an important role in balancing the consumption of fuel.
How does the U.S. plan to meet the growing natural gas shortage if Chevron does not become involved in Stockman?
We have been able to establish beneficial partnership relations with state and private oil and gas companies and other fundamental participants on the oil and gas markets in various countries. In particular, we can use the example of our cooperation with in an independent enterprise with North West Shelf LNG of Australia, which has been producing LNG since 1989. Among recent projects in LNG are ones in Angola and Australia being implemented under Chevron leadership. We are also managing the largest gas reserves in Australia and West Africa. In the long-term, LNG received from these projects will be supplied to the U.S. Irrespective of that, we are interested in developing partnership relations with Gazprom. And we will be happy if Gazprom becomes our partner on the U.S. natural gas market.
How Rich Chevron Is
Chevron is one of the world's largest producers and sellers of natural gas. The company's reserves consist of about 2.38 trillion cu. m. of natural gas. Chevron is one of the three largest producers of natural gas in the American part of the Gulf of Mexico and in the U.S. in general. The company is active in Argentina, Canada Colombia, Denmark, Indonesia, Kazakhstan, Norway, the Philippines, Thailand, Great Britain, the United States, Venezuela and other countries. In 2005, its daily production was greater than 2.5 million barrel of petroleum equivalent. More than 70 percent of that volume was produced outside the U.S. The company is on Gazprom's shortlist for the development of the Stockman deposit.