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. Last Updated: 07/27/2016

Shtokman Shortlist Down to 5 Bidders

Gazprom on Friday will name five potential partners for the giant Shtokman gas fields in the Barents Sea, a source familiar with the situation said Wednesday.

The long-awaited announcement, to be made in Moscow on Friday morning, is due just hours ahead of a meeting in New York between President Vladimir Putin and U.S. business leaders that will likely include the CEOs of the three U.S. energy majors bidding to be part of the project, ExxonMobil, Chevron and ConocoPhillips.

Putin is in New York for the three-day 2005 UN World Summit, called to commemorate the United Nations' 60th anniversary.

Putin's meeting with the U.S. energy companies will be held "in line with boosting the energy dialogue, including joint projects in the oil and gas sector," a Kremlin source said Wednesday, Interfax reported.

The Kremlin press service confirmed that the meeting with the U.S. businessmen was on Putin's agenda but said no separate meeting with the energy companies was planned.

At their Bratislava, Slovakia, summit earlier this year, Putin and U.S. President George W. Bush sought to revitalize the energy dialogue between the two countries, which has been slowed for the best part of two years as a result of the fallout from the Yukos affair.

Most of the liquefied natural gas from Shtokman has been earmarked for export to the United States, which plans to boost gas imports tenfold to 100 billion cubic meters per year by 2020.

The Shtokman fields, located on the shelf of the Barents Sea in the Arctic, contain proven reserves of 3.2 trillion cubic meters of gas and 31 million tons of gas condensate, while their development costs are estimated at $10 billion to $15 billion. The project will begin to deliver commercial gas some time after 2010.

Apart from the three U.S. majors, France's Total, Japan's Sumitomo and Mitsui, Norway's Statoil and Norsk Hydro, Royal Dutch Shell and U.S. energy services company Sempra have expressed a desire to be involved in Shtokman. A number of other companies, including PetroCanada, have also made cooperation proposals to Gazprom.

Gazprom has not said exactly how many partners it will select for the fields' development, the building of an LNG plant and an associated port. Senior Gazprom officials have said that they are looking to select two or three partners for the project. The final decision is expected by the end of the year.

Analysts on Wednesday tipped the three U.S. majors, along with Norway's Statoil and Norsk Hydro, as the most likely companies to make the cut.

"LNG technology, money and access to markets are the criteria. ... The Norwegians have the ongoing LNG projects, while the U.S. companies have money and access to the market," said Stephen O'Sullivan, co-head of research at UFG.

Some analysts have also mentioned Japan's Mitsui as a possible contender but noted that any attempts to figure out Gazprom's choices were just guesswork.

In a separate move Wednesday, Norsk Hydro announced it would drill an exploration well with Gazprom in the Shtokman fields' area of the Barents Sea. However, Gazprom spokesman Sergei Kupriyanov said that the drilling deal was not related to the announcement of the shortlist. "They have the platform that we wanted to use for that well," he said. He refused to comment on the shortlist announcement.

Andrew Somers, president of the American Chamber of Commerce in Russia, said that Shtokman was a key test for how much of a share foreign investors would be allowed in Russia's strategic reserves and what effect a future law on subsoil resources would have on foreign investment in the oil and gas sector. "This project must be looked upon as a litmus test," Somers said.

Putin's meeting with the U.S. energy majors should help to rebuild some of investors' confidence in Russia after the Yukos affair, Somers said, noting that Russia had effectively taken the last two years to rethink its policy toward the state's role in strategic sectors.

Shtokman aside, there are still plenty of projects for the U.S. energy majors to discuss with Putin, including the possible construction of LNG plants near St. Petersburg and on the Yamal Peninsula.