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Financial Times: Gazprom dashes hopes of foreign stakes in Shtokman

By Neil Buckley in Moscow and Carola Hoyos in London
Published: October 10 2006 03:00 | Last updated: October 10 2006 03:00

Gazprom said yesterday it would develop Russia’s massive Shtokman natural gas field alone – and switch eventual output from the US to Europe – dashing the hopes of foreign companies vying for stakes in the $20bn project.

Alexei Miller, chief executive, told Russian television the monopoly had decided against offering 49 per cent of Shtokman to five short-listed international groups because they had been unable to offer suitable assets in exchange.

The shortlist included Chevron and ConocoPhillips of the US, Norway’s Statoil and Norsk Hydro, and France’s Total.

Mr Miller said Gazprom was changing the priority of Shtokman – which has reserves bigger than those of the UK and Norway combined – from shipping liquefied natural gas to the US to supplying Europe via pipelines. The field would now feed a pipeline under construction across the Baltic Sea floor from Russia to Germany.

“We have taken the decision that the development . . . will proceed without the participation of foreign companies – 100 per cent of the reserves will belong to Gazprom,” he said.

The announcement highlights the Kremlin’s determination that Russian companies should take the lead in developing the country’s oil and gas. It follows pressure on the Royal Dutch Shell-led Sakhalin-2 project, and signs that state-controlled Gazprom wants to buy out private Russian shareholders of TNK-BP, the Anglo-Russian joint venture.

The news is a particular setback for the US, which expected to have two participating companies and to be the main recipient of natural gas.

“This is a fairly deliberate statement of intent that Russia is going to orientate its economic co-operation as well as political co-operation towards Europe, not the US,” said Chris Weafer, chief strategist at Alfa Bank in Moscow.

He warned that the move might delay Russia’s accession to the World Trade Organisation. Russian and US negotiators were to meet in Geneva this week to try to eliminate the remaining obstacles to Moscow’s WTO bid.

Gazprom was preparing to announce its Shtokman partners this year but appeared to back off after the participation of US companies became entangled with talks over Russia’s WTO entry.

Short-listed foreign groups said they had not been notified of Gazprom’s decision and declined to comment.

Oil executives and analysts speculated that Gazprom might reconsider, questioning whether it could tackle the challenging project in the Barents Sea with the help only of foreign construction and service companies.

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