Gazprom, Partners Sign Shtokman Pact

ReutersFrom left, Total CEO Christophe de Margerie, Miller and Lund announcing the deal at Gazprom headquarters Thursday.
Gazprom on Thursday signed an agreement with Total and StatoilHydro to create a company charged with the first phase of developing the vast and remote Shtokman natural gas field.

The agreement was signed with France's Total and Norway's StatoilHydro. Both companies last year signed framework agreements for project participation with Gazprom, and the new agreement represents a step forward in extracting gas from the huge field under the Arctic waters off the country's northwest coast.

Total and StatoilHydro will have shares of 25 and 24 percent in the company respectively, with Gazprom holding 51 percent.

Shtokman is to be the main source of gas for the Nord Stream pipeline, which will take gas to Germany and other European countries. It is also expected to produce liquefied natural gas that will be exported to various countries, including the United States. Plans are for gas to start flowing from Shtokman in 2013.

Tapping the field is technically daunting, and StatoilHydro's expensive experience at developing remote offshore fields was seen as key to the project's success. The firm developed Snohvit, the first offshore field in the Barents Sea.

The company had to develop much of the technology needed to produce the gas in harsh Arctic conditions, and in an environment similar to Shtokman.

The new operating company, based in Zug, Switzerland, will plan, finance and build the first stage of the Shtokman development, which could eventually produce up to 100 billion cubic meters of gas per year. Gazprom CEO Alexei Miller said Shtokman's first phase was expected to produce about 11 bcm of pipeline gas annually. LNG production would reach 7.5 bcm annually.

"Today we are seeing the first phase of practical work," Miller said.

StatoilHydro president Helge Lund said the Shtokman project was important "to develop technologies for the oil industry to tackle tougher challenges."