TPT January 2007

Oil & Gas News

the country’s largest oil company, and expressed environmental concerns about the two state-owned energy giants Gazprom and Rosneft. A Lukoil spokesman suggested that Rosprirodnadzor would do better to concentrate on ‘preserving nature and ecology’ rather than interfering in licensing issues which are not in its brief. Not daunted, Mr Mitvol says he plans to investigate all of Russia’s natural- resource companies – no matter whose toes he steps on. Mr Mitvol, who says he intends to sue the Sakhalin operators for billions of dollars in damages, denied a rumour that his real objective in going after the Shell consortium is to force a renegotiation of its agreement with Russia and gain a stake in the project for Gazprom. Gazprom , Russia’s natural gas monopoly, on 10 October abruptly broke off talks with five international companies bidding for a stake in a major offshore natural gas field, cancelling the largest energy deal involving foreigners expected last year. Gazprom’s chief executive, Aleksei B Miller, said his company would extract the gas from the challenging Shtokman field without foreign help and retain full ownership of one of the world’s largest untapped sources of energy. Deep under the Barents Sea, Shtokman holds 3.7 trillion cubic meters of gas and 31 million metric tons of gas condensate, enough to supply the energy needs of the world for a year. The project was to come online in 2010, but Mr Miller’s decision to cancel the venture will probably push back by years the first shipments of gas from one of the largest fields outside of the Middle East. In the joint venture now cancelled, Chevron and ConocoPhillips of the US, Statoil and Norsk Hydro of Norway, and Total of France were bidding for up to 49 per cent of the $20 billion Shtokman field. Gazprom will go it alone in development of a gas field far above the Arctic Circle

Ecology-minded Russian official may hobble Sakhalin development Oleg Mitvol, deputy head of Rosprirodnadzor, Russia’s environmental protection agency, has been waging a campaign against the Sakhalin II oil and gas project in the Russian Far East, in which Anglo-Dutch energy giant Royal Dutch Shell is the major investor. Shell is a 55 per cent partner in Sakhalin Energy Investment, which is drilling for natural gas off the coast of remote Sakhalin Island. Mitsubishi and Mitsui , of Japan, are the other key shareholders. On 19 September the Russian government cancelled an environmental permit for Shell’s $20 billion project, threatening suspension of the work. This involves building drilling platforms off Sakhalin Island in the Sea of Okhotsk. Pipelines from those platforms run the length of the pristine island, crossing 1,000 watercourses. The World Wildlife Federation, an environmental group, has also raised strong objections to the project. Sakhalin Energy acknowledges some of Mr Mitvol’s claims but says that it promptly corrects problems with pipeline construction and erosion control as they occur in the course of an exceptionally challenging project. This is apparently not good enough for Mr Mitrvol, who asserts that officials in America or Germany or Britain – charged with protection of the environment – would take the same position.

Mr Mitvol says he plans to investigate all of Russia’s natural-resource companies – no matter whose toes he steps on

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Mr Mitvol, who has called himself ‘a sort of Robin Hood’ , is an even-handed crusader. During his tenure, Rosprirodnadzor has turned its attention to Russia’s own oil and gas enterprises. It has challenged 19 licenses held by Lukoil,

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The field was the centrepiece of an effort by the Bush administration to reduce American dependence on oil from the Middle East by recruiting Russia as a supplier. Output from Shtokman was to be cooled into liquefied natural gas (LNG) for shipment to the East Coast of the United States, where it could be converted to gas. Mr Miller said the gas will be shipped to Germany instead, through a pipeline under the Baltic Sea. Another Gazprom spokesman said the company’s priority would be pipeline gas, not LNG. Talks on the big energy deal had gone on for years, and were sometimes seen as linked with Russia’s bid to join the World Trade Organization. According to this analysis, if the US blocked Russia’s entry into the WTO, American companies would be cut out of Shtokman. Now, however, Washington and Moscow have apparently papered over their differences in this regard. An agreement in principle for Russia to join the WTO in 2007 was expected to be signed 17 November, when Mr Bush and President Vladimir Putin of Russia would both be in Hanoi for an Asia- Pacific Economic Cooperation meeting.

Corus Tubes

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J ANUARY /F EBRUARY 2007