Uchenna Izundu
OGJ International Editor
LONDON, Mar. 26 -- Shtokman Development Co. AG Chief Executive Yury Komarov told reporters in Russia the company will not reevaluate costs at present for development of the massive field, which will deliver pipeline gas and LNG to Europe and the Atlantic Basin.
Shtokman, which is in the Barents Sea, is expected to cost $30 billion and will be financed by banks and company shareholders OAO Gazprom, Total SA, and StatoilHydro. As oil prices and commodity prices have slumped, the costs of many projects are being renegotiated to gain cheaper deals.
"So far we are not reviewing the estimated costs, but we agree that the market situation is good," Komarov said. "The crisis is helping us secure good prices and promoting competition, and we are seeing a good trend.
"We will begin intense talks with the banks this year, he said. "The founders understand that, initially, funding will come from our own capital." Exact investment figures for the project will be available in first-quarter 2010.
About 70-80% of Shtokman's LNG will be sold under a contractual basis. Alexei Miller, chief executive of Gazprom, previously had said that Spain will be a recipient. Earlier this month, following Miller's visit to Spain, Russia and Spain signed an energy cooperation pact in which they pledged to develop oil and natural gas and cooperate in transportation and sales.
Spain said its energy security would be enhanced, and its companies would have access to Russia's resources. It has already indicated that cultivating a better relationship with Russia will be a top priority when it assumes the European Union presidency in 2010.
Shtokman holds 3.8 trillion cu m of gas. The first phase of development requires 23.7 billion cu m/year of production. The first delivery of pipeline gas is scheduled for 2013, and LNG deliveries are scheduled to begin in 2014, Komarov added. His comment douses concerns that the project could not meet its timetable in light of the global recession where companies are under pressure to cut future capital expenditure.
The final investment decision had been scheduled to be made by yearend 2009, but it has been revised to 2010 because of the volumes of preparatory work. That will not impact other project deadlines, however, the Barents Observer quoted him as saying. "There are many complicated questions. The region is specific," he said.
In February, a consortium led by Aker Solutions won the front-end engineering and design (FEED) contract worth €25 million for the floating production unit (FPU) on Shtokman.
Other members of the consortium are Technip SA and SBM Offshore. FEED conclusions will be finalized within the next 12 months.
The scope of work includes design; FPU concept definition; FEED design for the hull, turret, and mooring system; and topsides. The full engineering, procurement, construction, and commissioning contract is expected to be awarded next year.
The results of other Shtokman FEED contracts will be ready in the second quarter of this year. Technip SA is carrying out the FEED for an onshore gas technology complex, including the LNG plant.
Contact Uchenna Izundu at [email protected].
