Russ Oil-Gas

October 1, 2007 - International Herald Tribune by Judy Dempsey - BERLIN: Russia will use some of the vast reserves in the Shtokman fields to supply gas to Europe, officials of the German-Russian consortium that will transport the fuel said Monday. Confirming for the first time that the Shtokman fields would be tapped, the officials said that Gazprom was seeking to reassure European customers that Russia would develop one of the largest offshore natural gas reserves in the world. Europe increasingly depends on Russian gas, buying more than a quarter of its total from Gazprom, the state-owned energy monopoly. Energy analysts said Europe, which imported around 330 billion cubic meters of gas in 2005, would require an additional 200 billion cubic meters per year by 2015. Some of the gas would be transported to Europe through a new pipeline. Officials from Nord Stream, the German-Russian consortium that will build the 1,200-kilometer, or 750-mile, pipeline under the Baltic Sea, said it would meet about a quarter of the extra demand. "The decisive factor is Shtokman," said Jens Müller, the spokesman for Nord Stream. "The future is Shtokman. It will feed gas into Nord Stream." Instead of an earlier plan to convert much of the gas from Shtokman into liquefied natural gas for shipment to Europe and other markets, much of it will now allocated to Nord Stream, which includes Gazprom and two German partners, E.ON Ruhrgas and Wintershall. When completed, perhaps by 2012, Nord Stream will consist of two parallel pipelines with a total annual capacity of 60 billion cubic meters. They will stretch from Vyborg, Russia, to Greifswald, Germany and will allow Gazprom to reduce its dependence on Ukraine, Belarus and Poland as transit countries. Since the project was officially inaugurated two years ago in Berlin by Vladimir Putin, the Russian president, and Gerhard Schröder, who was chancellor at the time, Nord Stream has faced delays, mainly over obtaining construction permits. Schröder, a friend of Putin, became chairman of Nord Stream in late 2005 after he left office. This project has already involved lengthy consultations with countries along the Baltic Sea which include Finland, Sweden, Denmark, Germany. Russia, Poland, Estonia, Latvia and Lithuania. Some of these countries, particularly Estonia and Sweden, bitterly oppose Nord Stream, claiming it will damage to the environment. Others say they fear that Europe would become too dependent on Russia. Last week, Estonia refused to permit Nord Stream to conduct sea bed surveys in Estonian waters. Urmas Paet, the Estonian foreign minister, said in a statement that the survey would have provided information to Nord Stream about Estonia's natural resources. In Sweden, officials said Nord Stream wanted to build a platform in Sweden's economic zone. "They need a permit for that. Yet the company has not yet applied," said Sten Jerdenius, an official at the Swedish environment ministry who is closely involved in consultations with Nord Stream over the environmental impact of the project. "We are still waiting for the official application," he said. Müller said applications for construction permits from national governments would be submitted in November and December. "These could be completed by the end of 2008," he said. "Realistically, we can start building in 2009. The first pipeline could be finished by 2010." Despite the delays, Müller said the company had already chosen a German and Russian company to supply the steel pipes. It has also reserved two barges to lay the pipe on the bed of the Baltic. The daily cost of hiring such a barge, of which there are only four in the world, is €1 million, or $700,000, according to energy analysts. But with delays in starting the pipeline construction and delays in opening up the Shtokman fields, some energy analysts said they were skeptical whether either project would succeed. Vladimir Milov, director of Institute for Energy Policy in Moscow, said Gazprom was scaling down its investments for developing Shtokman. "Investments for 2007 have been reduced from $670 million to $335 million," Milov said during an energy conference in Budapest last month. He said such investments were insufficient for developing Shtokman. The Shtokman fields, in the Barents Sea, were at the center of a struggle last year between Putin and a group of foreign energy companies, including ConocoPhillips of the United States and Norsk Hydro of Norway, which had been competing to develop Shtokman. Putin abruptly declared that Gazprom would develop the fields alone. Just as abruptly, he changed his mind in July and asked Gazprom to invite Total of France to take a 25 percent stake in the company that will manage the infrastructure of the fields. Analysts said the turnabout was because Gazprom needed the technological expertise of Total.