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TheBusinessOnline: Shell in new push to develop $40bn arctic field

By : Richard Orange
14/03/2007

ROYAL Dutch Shell, the Anglo-Dutch oil company is angling for a role in developing the $40bn (£20.7bn, E30.3bn) Shtokman field in the Russian Barents Sea, one of the world’s largest energy projects.

The Business understands that Shell made contact with Gazprom earlier this year when it became clear the Russian giant was once again seeking an international partner to help develop the field.

In September 2005, the Russian giant produced a shortlist of five Western oil and gas companies to help it to develop Shtokman, thought to contain 113 trillion cubic feet of gas, the third largest reserve in the world. This comprised US oil groups ConocoPhillips and Chevron, France’s Total and Norway’s Statoil and Norsk Hydro. But not Shell.

Gazprom eventually decided it would develop the field alone. But in another U-turn in January, it sent letters to the shortlisted companies inviting them to re-start negotiations. However, this did not include Shell, which has made its own approach.

Shell failed to make the shortlist only months after it had angered Gazprom by doubling costs at it Sakhalin liquefied natural gas project.

It remains unclear whether Gazprom would agree to reopen the shortlist after reaching such an advanced stage of negotiations last year. It is equally not yet clear what terms Gazprom is now offering the bidders or what exact plans it has for the field. It is thought that they will act as contractors, helping Gazprom to develop the field in return for a fee.

Last year, Gazprom planned to offer a 49% stake in the gas field to two to three international oil companies. In return, the bidders would part-fund, manage and develop the field and a liquefied natural gas terminal.

Gazprom also wanted the Western companies to give it stakes in gas fields and gas infrastructure elsewhere in the world as part-payment for the deal.

Shtokman’s position 600 miles out into the icy Barent’s Sea will make it one of the most technically challenging gas development yet.

Shell refused to comment on what it called market speculation.

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