As I was wrote, it looks like the development of Shtokman — despite reaching a deal with Total — will remain a ways off into the future and will not be promoted to a top priority for Gazprom’s investment plan. Indeed, funds for the project in this year’s investment budget were cut, making room for other moves.
Earlier this year, Gazprom managed to take over control over the operation of the giant Siberian gas field Kovykta. It appears that a similar lack of urgency has overtaken the company with regard to this field, which had been under development by BP’s Russian joint venture, TNK-BP. In MinPromEnergo’s latest report on the development of Eastern energy projects, Kovykta has been pushed back to 2017.
While it was unlikely any significant gas exports would have been flowing until at least 2013 (despite past hopes that Gazprom would be exporting to China by 2011 or 2012), pushing the date back to 2017 is a significant delay. Even more so given the industry’s propensity for time overruns.
Kovykta’s position — near Lake Baikal in Eastern Siberia — suggests slating the field for export to the east, rather than connection the UGSS for export to Europe or LNG. However, Gazprom was not getting very good cooperation from the Chinese side of the bargaining table, and they have been unable to come up with a firm pipeline route. The Chinese shot down the most obvious path — straight south, through Mongolia — and were instead aiming for a longer pipe that would drop down into eastern China nearer to Korea.
However, it is unclear that the Chinese market is prepared for the kind of large scale imports from Russia that the expensive pipeline would necessitate. Chinese infrastructure is not geared towards gas consumption, with China currently relaying on oil and coal for a majority of their energy needs (coal: 69%; oil: 22%; natural gas: 3%). The country produces about 40 bcm per year and has about 1.5 Tcm of gas reserves. The Kovykta pipeline would likely have to transport around 10 bcm per year to be viable, so there just wouldn’t be a market for it in China alone without including Korean or LNG export routes.
Perhaps in 10 years, Chinese demand will change, leading to a more viable situation. But until then, Gazprom will be content to sit on the 1.5 Tcm Kovykta field.
Shtokman is more suited to pipeline export westward, as suggested by Gazprom’s goal of eventually routing the field’s gas production towards the Nordstream pipeline. Gazprom also envisages extending the undersea route further, eventually reaching Britain, which has recently switched from becoming a net gas exporter to a net importer due to declining North Sea production. This ambitious aim would need much more of a resource base than the 300 bcm Yuzhno-Russkoye field currently slated as a source. Shtokman has a much more solid predicted demand than Kovykta, thus bumping the Siberian field down the time line.
Gazprom may be now attempting to shore up production numbers by concentrating on some smaller developments before tackling either of the major super-giant fields, accounting for the shifting demand. At least, that could be a possibility, but in reality, the company spent much of the increased investment budget on capital, rather than infrastructure, pursuits — stakes in Sakhalin-II, Belarus’ Beltransgaz, and Mosenergo. It remains to be seen how these investments effect Gazprom’s future medium term production levels.