May 18, 2006

Russia delays Arctic gas field as mood to US chills

By Denis Pinchuk

ST PETERSBURG, Russia (Reuters) - Russia has again delayed
the $20 billion development of a giant Arctic gas field,
planned to help supply the U.S. market, as attention focuses on
a frostier mood between Washington and Moscow.

Russian gas monopoly Gazprom will name its foreign partners
for the huge Shtokman gas project "this summer," Energy
Minister Viktor Khristenko said on Thursday, adding a further
delay to the project that was first planned to start in 2000.

Keeping U.S. firms ConocoPhillips and Chevron, suitors for
a slice of Shtokman, hanging on has been linked to friction
caused by a tough Washington stance on Russia joining the World
Trade Organization.

Russia's Aeroflot earlier this month also delayed a $3
billion plane order, prompting speculation it will pick
Europe's Airbus ahead of U.S. Boeing Co.. Delays in that deal
too pointed to political factors, analysts said.

The Moscow Times newspaper on Thursday quoted Kremlin
spokesman Dmitry Peskov as saying that Russian presidential
aide Igor Shuvalov spelt out the position on Shtokman to a
Washington audience on April 12.

Peskov was quoted as saying that Shuvalov had warned that
"if the United States puts new demands to Russia in WTO
negotiations that haven't been put before other countries, then
it can't be excluded that new demands will be put before
American companies for participating in the Shtokman project."

On Thursday, Peskov told Reuters neither he nor Shuvalov
were directly linking WTO talks and Shtokman.

"What we want to say is that nobody can expect us to create
an especially favourable regime when new unexpected demands are
being raised in WTO talks. The key thing here is reciprocity,"
Peskov told Reuters.

"As for Shtokman, our position here has not changed and the
choice of partners will be purely economic," he added.

Gazprom has also shortlisted France's Total and Norway's
Statoil and Norsk Hydro for Shtokman.

Statoil and Hydro shares dropped sharply on the latest
delay. Analysts say Total is the least favorite for selection.


Gazprom wants to choose two or three partners for the
project but has repeatedly delayed the final announcement from
the first quarter of 2006, saying it needed more time to
analyze the proposals on how to tap the Arctic Barents Sea

The most recent delay came on Wednesday, when Gazprom
deputy head Alexander Ryazanov said in Tashkent the
announcement was delayed from mid-May until the end of the

He also said that recent criticism of Russia by Vice
President Dick Cheney would not affect the choice of partners.

Cheney said this month that Moscow was playing power
politics with its vast resources and warned against any attempt
to turn oil and gas into tools of intimidation or blackmail.

Gazprom, the world's largest gas producer, which supplies
Europe with a quarter of gas needs, plans to make Shtokman a
platform for shipping liquefied gas to the United States.

Located under the stormy and iceberg-strewn Barents Sea,
550 km from Russia and Norway, Shtokman has reserves of around
3.7 trillion cubic metres of gas.

Discovered in 1988, Shtokman has been repeatedly postponed
as Gazprom lacked funds and was unable to agree with Western
companies on the financing.