Russ Oil-Gas

15 May 2009 - The Moscow Times by Anatoly Medetsky - The Gazprom-led international company set up to develop Shtokman, a huge offshore Arctic gas field, has opened up bidding for contracts in a step that will better define the project's costs by the end of the year. Shtokman Development AG will invite more bids over the next few weeks in addition to the offers it has already posted on its web site since the end of April, Andrei Plis, the company's head of supplier surveys, said Thursday. It's now estimated that the field would cost Gazprom, France's Total and Norway's StatoilHydro, which are partners in Shtokman Development AG, $15 billion to develop. Prime Minister Vladimir Putin and his Norwegian counterpart Jens Stoltenberg may discuss the project when they meet in Moscow on Tuesday. In one of the higher-profile offers so far, Shtokman Development has announced a bidding for a 600-megawatt power plant near the Teriberka village on the Barents Sea, where the underwater gas pipeline will come to shore. There were a total of eight bidding invitations posted as of April 28, Plis said. The offers include offshore and onshore geological surveys for the project. There are no restrictions for foreign contractors in the field's development, just a recommendation that they hire Russian companies to do some of the work where possible, Plis said. "Every potential bidder must realize this and seek to broaden the Russian involvement," he said. Shtokman Development has been expanding its contacts with potential Russian bidders recently, informing them of opportunities and looking at their potential, Plis said. The company is holding a meeting with the members of the Association of Oil and Gas Equipment Producers on Friday. The association, its director Alexander Romanikhin said, is seeking a government decision to put a cap on the proportion of contracts that Shtokman Development will award to foreign competition. The global economic crisis is unlikely to lead to steep discounts by any association members because their costs keep rising, fueled by the government's decision to raise the regulated gas and electricity prices, he said. Shtokman Development chief Yury Komarov sounded upbeat Wednesday on keeping costs at bay. "Today, the situation is favorable," he said, adding that the budget will shape up more clearly after the bidding, Interfax reported. Bidding for the project is scheduled to finish by the end of the year, allowing Shtokman Development to make the final investment decision in the first quarter of next year. First Deputy Prime Minister Viktor Zubkov reiterated at a meeting with Stoltenberg in Oslo on Thursday that the government expected the decision at the start of next year. Initially, Shtokman Development planned to decide on investment at the end of 2009, but Gazprom deputy chief Alexander Medvedev announced in February that the date had been moved back to early 2010. The deadline for producing the first gas remained unchanged -- 2013, Komarov said later.