Shtokman shareholders postpone investment decision until March

The shareholders in Shtokman Development AG (SDAG), the project to develop the big Shtokman gas condensate field in the Russian sector of the Barents Sea, agreed at a meeting on Thursday to postpone the final investment decision until March 2012. Russian Gazprom along with French Total and Norwegian Statoil had planned to make the final investment decision before the end of 2011. “Following discussion of the current situation the shareholders decided to postpone the Final investment decision until the end of March 2012. This timetable to take FID is necessary given the importance and size of the Shtokman project,” SDAG said in a press release. Gazprom has a 51% stake in SDAG, Total has 25% and Statoil – 24%. “Shtokman is a strategic Project for all of the partners,” Gazprom CEO Alexei Miller, who is president of the SDAG board of directors, is quoted in the press release as saying. “In this context the FID must be well prepared taking into account scale and complexity of the Project. The shareholders and SDAG are determined to continue their good and close cooperation,” he said. Total and Statoil want Russia to approve substantial tax breaks for the project before they give their go-ahead. The two companies must also pay Gazprom a $1.5 billion signature bonus as soon as the FID is approved, according to media reports. Earlier this month Deputy Finance Minister Sergei Shatalov said the tax regime for Shtokman would mirror the arrangement on the Yamal Peninsula, another big Russian gas project. But he said the final proposal was unlikely to be ready before the end of 2011. Meanwhile, Energy Minister Sergei Shmatko has said that no decision on tax breaks would be made until the FID is approved and the feasibility study for the project has been submitted. Shtokman is scheduled to begin gas production in 2016, the head of Russian subsurface resource agency Rosnedra Anatoly Ledovskykh said at the end of November, citing the fuel and energy commission chaired by Deputy Prime Minister Igor Sechin. Output would initially be transported to market via pipeline. Production of LNG – 7.5 million tons a year - is slated to begin in 2017. The Shtokman field is located 600 kilometers northeast of Murmansk in waters up to 340 meters deep. The C1 resource in the license territory amounts to 3.8 trillion cubic meters of gas and 53.4 million tons of condensate.