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Investment Decision Preparation on Shtokman Phase 1

Source: www.gulfoilandgas.com 10/12/2010, Location: Asia

The Company’s headquarters hosted a working meeting moderated by Alexey Miller and devoted to development of the Shtokman gas and condensate field.

Participating in the meeting were heads and experts of Gazprom’s structural subdivisions, subsidiaries and Shtokman Development AG.

The meeting participants discussed the progress with the Shtokman project implementation. In particular, they reviewed various options for the onshore facilities allocation within all three phases of the field development.

During the meeting it was pointed out that the work on preparation for Phase 1 final investment decision was carried out within the schedules.

“The Shtokman project implementation is one of Gazprom’s strategic priorities. The project is unique in a technical sense both for Russian and international practice. I am sure that the activity of our joint venture Shtokman Development AG and the personal contribution of new CEO Alexey Zagorovsky as a recognized and experienced specialist will allow performing Phase 1 of this project in a most efficient way,” stressed Alexey Miller in the course of the meeting.

Based on the meeting results, Gazprom’s specialized subdivisions, subsidiaries and Shtokman Development AG were tasked to continue preparing complex technical and technological solutions ensuring economic efficiency and environmental safety of the Shtokman project at all phases of its implementation.

Background

The Shtokman field is situated in the central part of the Russian sector of the Barents Sea.

The field’s C1 reserves make up 3.9 trillion cubic meters of gas and 56.1 million tons of gas condensate, with 3.8 trillion cubic meters of gas and 53.4 million tons of gas condensate located within Gazprom’s licensed area.

The Shtokman gas and condensate field development project is of strategic importance for Gazprom. The field will become a resource base for deliveries of Russian gas – both by pipeline and in the form of LNG – to the Atlantic basin markets.

Gazprom neft shelf (former Sevmorneftegaz), a wholly owned subsidiary of Gazprom, holds the gas and gas condensate exploration and production license for the Shtokman field.

Gazprom partners with Total (France) and Statoil (Norway) in the Shtokman project execution.

In February 2008 Gazprom, Total and StatoilHydro signed the Shareholder Agreement on establishing Shtokman Development AG, a special-purpose company to engineer, develop, construct, finance and operate the Phase 1 facilities intended for the Shtokman field development.

The special-purpose company will own Phase 1 infrastructure of the Shtokman field for 25 years, starting from the field commissioning date.

On February 5, 2010, taking into account the market changes, particularly on the LNG market, the Shtokman Development AG Board of Directors decided to single out the construction of the Startup Complex for Pipeline Gas Supplies into a separate stage within Phase 1.

The final investment decision on pipeline gas production is planned to be taken in March 2011 and the decision on LNG production – before the end of 2011, at the next stage. Such an approach will enable to begin pipeline gas and LNG production in 2016 and 2017, accordingly.

In 2008 the Vyborg Shipbuilding Plant launched the construction of two semi-submersible drilling rigs to drill production wells in the Shtokman field.

Designed for operation in the severe climatic conditions of the Extreme North, the Polyarnaya Zvezda and Severnoye Siyaniye platforms can resist the waves up to 32 meters high and perform exploratory and production drilling of gas and oil wells reaching 7,500 meters at water depth of 70 to 500 meters.

The first semi-submersible drilling rig is to be constructed in the fourth quarter of 2010, the second one – in the first quarter of 2011.

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