Shtokman surprise a reminder of BTC pipeline rebuke

Bob Tippee

Russia's Oct. 9 turnabout on development of Shtokman gas and condensate field in the Barents Sea shows that the sword of pipeline politics has two edges.

Instead of taking aboard international partners for the world-class project, OAO Gazprom said it would work solo.

The decision fell hard on the five short-listed companies that had competed for what were to have been two minority interests in the project (OGJ Online, Oct. 10, 2006).

It also diverted Shtokman gas away from the US. Gazprom said it would base development on a pipeline to Germany instead of an US-oriented LNG scheme.

Gazprom attributed this new Russian elbow into the ribs of international investment to economics, not least the uncertainty of LNG sales in comparison with pipeline deliveries secured by long-term contract. The move surely will help Russia reestablish its supply-security credentials after scaring European customers last winter by cutting deliveries to Ukraine.

It also may represent exasperation over Washington's resistance to Moscow's entry into the World Trade Organization.

Long forgotten in the eminently forgetful US is the rebuke to Russia embodied in the Batumi-Tibilisi-Ceyhan crude oil line between Azerbaijan and Turkey by way of Georgia.

That 1,040-mile, $4 billion marvel, operated by a BP group, started up last May. It is supposed to transport 500,000 b/d by the end of the year and can carry twice that much.

There were shorter and cheaper routes for Azeri output. But they would have transited Armenia, with which Azerbaijan lives in perpetual hostility, or Iran, with which the US has longstanding quarrels.

Another pipeline through Russia might also have been an option. But it would have increased tanker traffic through the Bosporus Strait over the objection of Turkey, which anyway stood to profit from the BTC project.

So the US strongly supported—some might say pushed—the BTC pipeline. And the justification's short version always had little to do with Turkey and much to do with avoiding Iran and Russia.

It's probably too much to read BTC comeuppance into the Shtokman stunner. But it's useful to remember that nobody's above playing politics with pipelines.

(Online Oct. 13, 2006; author's e-mail:

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