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UPI: Analysis: Western access to Russian field?

By STEFAN NICOLA
UPI Correspondent

BERLIN, Sept. 26 (UPI) — Russian President Vladimir Putin said Europe may be allowed to tap into one of Russia’s largest natural gas fields, an apparent move to soothe European concerns over energy security.

In a meeting with German Chancellor Angela Merkel and French President Jacques Chirac near Paris, Putin said the gas reserves at the bottom of the Barents Sea (the Shtokman field), could be made accessible to European customers.

Russia exports roughly 55 billion cubic meters of natural gas to Germany, with the Shtokman field able to bring another 25 billion to 45 billion cubic meters online, Putin said, according to the Frankfurter Allgemeine Zeitung newspaper.

“It will deliver gas for the next 50 to 70 years,” the daily quoted Putin as saying. “It will create an absolute stable situation for Europe’s economic and energy policy, especially in Germany.”

Shtokman is one of the world’s largest natural gas fields, with reserves estimated at 3.2 trillion cubic meters. Russian state-controlled energy giant Gazprom has selected five companies — Statoil and Norsk Hydro from Norway, Total from France and Chevron Corporation and ConocoPhillips from the United States — as finalists in a search for partners to develop the field.

Putin said Gazprom would check the option of allowing Western Europe to receive some of the Shtokman reserves, a plan initiated by Merkel. Initially, the Shtokman reserves were intended exclusively for the U.S. and Asian markets, and for Russia’s own needs.

Merkel has been unhappy about a Russo-German project drawn up by her predecessor, Gerhard Schroeder. The then chancellor had, together with Putin, pushed an underwater gas pipeline project under the Baltic Sea, linking Germany to Russian gas resources while stripping Poland and the Baltic countries of transfer fees.

The project has irritated Poland, and Merkel Sunday said she would like to include Germany’s eastern neighbor.

But the German-Russian underwater pipeline is not the only project that worries European officials.

France is concerned over media reports that French company Total will be stripped of its development license of the Kharyaga deposit in Western Siberia.

Putin tried to allay those fears, calling the media reports “rumors” that were “strongly exaggerated.”

A withdrawal of the license would fall in line with other recent actions Moscow has undertaken because of what it says are environmental reasons.

Last week, Russia said it would withdraw the drilling license of Anglo-Dutch company Royal Dutch Shell in the Sakhalin-2 energy project because the project endangered grey whales feeding off the coast.

The Russian government, usually not known for its environmental credentials, has come under fire for the move, seen by some observers as an attempt to bring home Russian fields as the battle for resources is growing increasingly costly.

Moscow is also rowing with U.S. energy giant Exxon Mobil over Sakhalin-1, the field north of Sakhalin-2. Exxon Mobil has announced it would have to nearly double production costs, a move that has led the Russians to threaten to pull its license as well. Shell has also said it needs to raise production costs, which would mean that Russia will lose money: The production-sharing agreement the western companies have with the Russians says they can get back all investment costs before paying royalties to the Kremlin — an increase in production costs would push back those payback dates.

Furthermore, observers say, Russia is unhappy about the conditions of these production-sharing agreements, which were designed roughly a decade ago, at a time when energy prices were low and the Kremlin lacked the resources to develop the fields on its own.

Europe, as a reaction to heightened concerns over energy security, should cooperate more closely when it comes to energy policy, France’s prime minister said Friday in Berlin.

“Europe needs a common energy strategy,” Dominique de Villepin said, adding that the European Union should institute a “special envoy for energy” who would work closely with Javier Solana, the body’s foreign policy expert.

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