Gazprom Says Shtokman Will Be Viable If Oil More Than $60

Gazprom's offshore Shtokman natural gas project will remain economically viable with oil prices at about $50 or $60 a barrel, the operator of the Arctic project said.

"This is realistic. The era of cheap oil and gas is over," Yury Komarov, CEO of Gazprom's Shtokman Development, said Monday. "This is a strategic project with a 50-year lifetime."

Gazprom and its partners, Total and StatoilHydro, expect to come up with at least 30 percent of financing for the project themselves, Komarov said, with the rest coming from banks.

Shtokman, with enough gas to meet world demand for more than a year, is crucial to filling Russia's export obligations to Europe as older fields in western Siberia are depleted. Construction is expected to begin in 2010, with first gas deliveries beginning in 2013.

A delay of one or two years would have a "colossal significance" for the project, Komarov said. Gazprom expects Shtokman to be providing 11 percent of output by 2020.

Gazprom last year picked Total and StatoilHydro as partners in the operating company to help meet the technical challenges of developing the field 550 kilometers offshore in the Arctic Ocean.

The Shtokman development will consist of three subsea production facilities, three platforms and three pipelines, each 550 kilometers long, Komarov said. The project's liquefied natural gas plant will annually produce 30 million tons of LNG, which is gas chilled to a liquid for shipment by tanker.

Shtokman will be developed in three phases, each with an annual production target of 23.7 billion cubic meters. A fourth phase is possible, Komarov said, bringing total yearly output to 95 billion cubic meters.

Shtokman was discovered in 1988, but a lack of technical expertise and financing prevented its development during the final days of the Soviet Union and Russia's transition to capitalism in the 1990s.