Russ Oil-Gas

16 June 2008 - Upstream OnLine - Russian gas export monopoly Gazprom said today it has dropped plans to produce liquefied natural gas on the Yamal peninsula with Anglo-Dutch supermajor Shell. Vasily Podyuk, head of Gazprom's production department, told Reuters tough weather conditions would make production of LNG too complicated on the gas-rich Arctic peninsula. "This option has been discussed, but at the moment we have dismissed the project due to complicated ice conditions," Podyuk said during a news briefing. Shell said this month it had signed a memorandum with Gazprom on co-operation on the development of gas reserves on the Yamal peninsula and elsewhere, including the possible construction of gas liquefaction facilities. Speaking at the energy forum in St Petersburg this month, Shell chief exectuive Jeroen van der Veer said Shell and Gazprom were discussing the possibility of working together on the construction of an LNG plant on Yamal. Shell declined to comment on Podyuk's remark. Gazprom views Yamal as its key source of future gas output as production is falling at mature deposits in West Siberia. The company has said new deposits on Yamal and in East Siberia and the Russian Far East will account for half of its output by 2020. Podyuk said Gazprom planned to produce between 250 billion and 300 billion cubic metres of gas on Yamal after 2020. The company expects its total gas output to rise to between 650 Bcm and 670 Bcm by 2020, up from 561 Bcm forecast for this year. Gazprom is operating Russia's two first LNG projects: Sakhalin 2 on the Pacific, which is scheduled to start LNG exports early next year, and Shtokman on the Barents Sea, to be launched in 2013. Shell became Gazprom's partner in Sakhalin 2 in 2007, when Shell - then the project leader - agreed to sell control to the gas giant following a protracted dispute with the Russian authorities.