Russ Oil-Gas

June 9, 2009 (Bloomberg by Stephen Bierman) - OAO Gazprom, the Russian exporter of a quarter of Europe’s natural gas, is seeking as much as 10 percent of the U.S. gas market by 2020 after two Arctic liquefied natural gas projects start producing. “The volume which we have right now is just 0.5 percent of natural gas consumption of the United States but with gas out of Shtokman and, maybe Yamal LNG, our share in the U.S. and Canada market would go up to between 5 and 10 percent,” Deputy Chief Executive Officer Alexander Medvedev told reporters today. Gazprom is aiming to develop the projects after opening Russia’s first LNG plant off the Pacific Ocean coast with Royal Dutch Shell Plc and Japanese partners in February. The state-run company, with StatoilHydro ASA and Total SA, intend to take an investment decision in the first half of 2010 on Shtokman, which has enough gas to meet world demand for more than a year. “We targeted that approximately 17 percent of the Shtokman volumes would reach North America,” Medvedev, speaking in English, said before a roundtable discussion with Royal representatives. The state run gas exporter estimates global LNG demand to grow at an average annual rate of 6 percent to 8 percent for the next few years, Medvedev said.
Feasibility Study: Gazprom will also cooperate with OAO Novatek, Russia’s largest non-state gas producer, on a feasibility study for an LNG facility to export gas from deposits on the Yamal peninsula, Medvedev said. Gazprom owns just under 20 percent of Novatek. Gazprom has already received several proposals on the project as well as an “arrangement with Shell” on LNG development in Russia, Medvedev said. “In the next two to four years there are some major challenges for the LNG business,” said Daniel Yergin, chairman of the Cambridge Energy Research Associates. “We see for the short term what we call a gas bubble having developed.” Yergin attributed the “bubble” to the surge in natural gas supply, including new LNG, and the technological advances that have made unconventional gas profitable in the U.S. as well as the global economic crisis. “There’s one factor that makes natural gas, of all the hydrocarbons, the most forward looking fuel, and that is as you see the climate change agenda around the world getting stronger natural gas is going to be in a preferable position,” Yergin said. The Yamal peninsula may hold 22 trillion cubic meters of gas, enough to supply world demand for more than a decade, and may produce as much as 115 billion cubic meters a year by 2015, according to Gazprom’s Web site. “Even in the current depressed pricing situation with LNG in different parts of the world and relatively low prices in Henry Hub, we still do not see any danger to the feasibility of Shtokman,” Medvedev said, adding that a lack of investment may lead to a supply shortage as early as 2014.