Bloomberg News

Sovcomflot Says Gazprom’s Shtokman Needs $4 Billion Fleet

September 28, 2011

(Updates with Ambrosov on Arctic from second paragraph.)

Sept. 28 (Bloomberg) -- The OAO Gazprom-led Shtokman project to produce liquefied natural gas, or LNG, from a Barents Sea field almost 600 kilometers (370 miles) from shore may require a $4 billion fleet to transport the fuel.

The Shtokman project, which includes Total SA and Statoil ASA, may require 20 tankers, which in total will cost that sum, Evgeny Ambrosov, senior executive vice president of Sovcomflot told reporters today in Yuzhno-Sakhalinsk, Russia.

Gazprom, Russia’s largest gas producer, and its partners have delayed an investment decision on the Shtokman project to the end of this year as shale gas production in the U.S., the target market, damped demand for LNG. That pushed some cargoes to Europe, pushing down prices in a potential market.

Russia’s largest shipper is seeking to open an Arctic sea lane to Asia for large-scale commercial use during a five-month navigable season. Sovcomflot has reduced the time to navigate the passage by one to 7.3 days in test runs this year, Ambrosov said.

OAO Novatek, Russia’s second-largest gas producer, has tested the route with cargoes of condensate before building a plant to produce LNG on Russia’s Yamal peninsula. State- controlled OAO Rosneft, Russia’s largest oil producer, and Glencore International Plc, the world’s largest commodities trader, have also shown interest in the route, Ambrosov said.

Novatek’s Arctic Yamal LNG project, in which Total is a partner, may be the world’s most complex undertaking of its kind, Ambrosov said.

Sovcomflot plans to triple volumes of oil products it ships to 150 million metric tons in 2014, Ambrosov said. The tanker market continues to be “very tough,” he said.

The Russian government, which owns 100 percent of Sovcomflot, may sell shares next year.

--Editors: Torrey Clark, Alex Devine

To contact the reporters on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net; Stephen Bierman in Moscow at sbierman1@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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