GAZPROM'S EXPANSION TO THE US: WAIT AND SEE
MOSCOW, February 11 (RIA Novosti commentator Marina Pustilnik).
By the middle of this year, Russia's natural gas monopoly Gazprom plans to have chosen partners and established a consortium to implement a project for the delivery of liquefied natural gas (LNG) to the U.S. market from its massive gas fields off Russia's Arctic Coast.
Gazprom's deputy CEO, Alexander Ryazanov, recently said the company hoped to choose two or three foreign partners in the near future. He added that Gazprom was currently engaged in serious work with American companies and had already "signed memorandums with a number of them."
Gazprom's potential partners include the US giants ExxonMobil, ConocoPhillips and ChevronTexaco's Sempra Energy, as well as Canada's Petro-Canada, and Norway's Statoil and Norsk Hydro.
"All the companies are very strong," Mr. Ryazanov said. "The goal of the memorandums is to find partners to develop the Shtokman gas deposit and begin the deliveries of liquefied natural gas to the US market. After we identify the partners we will approach the Russian government and discuss the possibility of signing product sharing agreements."
The Gazprom official said the choice of partners would depend on who would offer the best conditions. The successful candidates would have to satisfy two main conditions. First of all, the Russian giant needs partners that have experience and technologies of producing natural gas in the North Sea.
"US and Canadian companies have such experience, and of course the Norwegian ones have the most experience of them all," Mr. Ryazanov said.
The second prerequisite for partnership is an ability to sell natural gas on the US market and therefore Gazprom needs a US company with a good market position. "In this regard, Chevron and ConocoPhillips have a wealth of experience," the manager said. He also stressed that it is very important to make sure that the future partner had "sufficient financial resources" because the first stage of the project, in Gazprom's calculations, will cost about $10 billion (including production, condensation and transportation to the US). "Of course it is difficult to finance such a project from Gazprom's balance sheet and we understand that we will have to take out loans," Mr. Ryazanov added.
The Russian gas monopoly plans to enter the American LNG market by 2010. Mr. Ryazanov said Gazprom could not afford to take its time over entering the market. "We will be able to find our niche on the US LNG market, but we have to hurry. In my opinion we should announce this year that by the end of 2010-beginning of 2011 we will enter this market with our liquefied gas," he said.
Gazprom first announced its intention to enter the US LNG market in May 2004. At that point, the company promised it would choose its partners by the end of the year. When speaking of possible partnerships, Mr. Ryazanov named ExxonMobil, ConocoPhillips, ChevronTexaco and Royal Dutch/Shell. The Gazprom official also said that a decision on the construction of a plant to produce condensed natural gas should be made quickly, preferably by the end of the year. "If we make a decision this year, we will be able to begin delivery of gas in 2010-2011," he said.
With no decisions on the construction of the plant made and no partnership agreements reached, Gazprom came up with a different idea for LNG exports to the US. In January, an announcement came that the gas monopoly would seek opportunities to ship LNG to Mexico for further re-export to the States. Gazprom's chief executive, Alexei Miller, who met Mexican Energy Minister Fernando Elizondo and executives of Mexican oil monopoly Pemex, said that Gazprom could start supplies of LNG to Mexico as early as this year. As the Russian monopoly currently has none of its own condensed gas, Gazprom was said to be in talks with a number of Western majors, including BP, on possible swaps of Gazprom's pipeline gas in Europe for LNG, which it will then ship to America.
Recent reports indicate that Gazprom has not given up on developing the Shtokman gas condensate field and establishing a long-running scheme to export the fuel to the US market. The problem with the Russian monopoly is that its public plans are often more optimistic than realistic, as was the case in November 2004 when Gazprom announced its desire to enter the UK gas market. The company spoke of hoping to grab as much as 10% of the market and said that its gas would be competitive despite traveling long distances to end consumers. UK market experts reacted skeptically, however, saying that the only thing Gazprom could hope for was a 5% market share by 2010. The same story is repeating itself with the expansion plans to the US market. Gazprom has already failed the first deadline it set for acquiring project partners and deciding on condensation plant construction. Whether or not it fails the second deadline set in the middle of this year remains to be seen. Common wisdom with Gazprom seems to dictate the following: pay no attention to the public announcements of intent, wait for the things to start happening. |
