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The Times: Chevron quits race to develop Shtokman gasfield

April 5, 2007
Carl Mortished, International Business Editor

Gazprom is trying to revive foreign interest in its giant Shtokman gas development after Chevron announced that it was quitting the contest to take part in the $20 billion project.

Chevron said yesterday that it no longer wished to take part in Shtokman, which is the world’s biggest undeveloped gasfield, situated in the Barents Sea.

“We sent a letter to Gazprom, saying we weren’t going to move forward to the next stage,” a spokesman for Chevron said.

The project to extract gas 500km offshore, inside the Arctic Circle, has become embroiled in geopolitics. Morever, the announcement last year by Gazprom that foreign investors would not be entitled to equity interests in the gas reserves was a blow to the ambitions of the Western oil majors.

In recent weeks, however, Gazprom has reopened negotiations without relenting on the issue of equity. Total, the French oil company, considers Shtokman to be a key opportunity and Christophe de Margerie, its chief executive, will hold talks with Gazprom in Moscow today.

Four companies — the merging Norwegian firms Statoil and Norsk Hydro, Conoco, of the United States, and Total — remain in contention for the project.

Shell is also believed to be talking to Gazprom after settling its dispute with the gas utility over the price for Gazprom’s acquisition of a stake in Shell’s Sakhalin 2 liquefied natural gas project. The Anglo-Dutch energy group hopes that Gazprom will be convinced that access to technology and project management skills is worth giving up a share of the equity.

With reserves of more than 100 trillion cubic feet, Shtokman has enough gas to supply Britain for more than 30 years. Originally earmarked for export as liquefied natural gas (LNG) to the United States, Gazprom opened a competitive tender for Western investors.

However, mounting tension with Washington over Kremlin energy politics led to a change of strategy, in which President Putin announced that gas from Shtokman would be piped to Europe.

— Total has denied newspaper reports that Christophe de Margerie, has been summoned for questioning by American authorities over allegations that Total bribed Iranian officials. However, the oil company has acknowledged that the US Securities and Exchange Commission has initiated an inquiry into the matter.

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