Development of Russia's Shtokman, one of the world's largest gas fields, will remain in limbo for a few more months as a Gazprom-led consortium pushes the government for tax breaks to help ensure the project is profitable.
Shtokman Development AG, in which Norway's Statoil and France's Total are shareholders, aims to develop the 3.9 trillion cubic metre field, the world's 10th largest, as a rising supply of shale gas and global economic uncertainty cast a pall on demand and prices.
The group said its board met on Thursday, two days before its deadline for a final investment decision (FID), and ruled that the shareholders could continue working toward a decision through the end of March.
A source close to the consortium earlier named April 1 as the new deadline.
"Shtokman is a strategic project for all the partners," Alexei Miller, chief executive of Gazprom and chairman of Shtokman Development AG (SDAG), said in a statement.
"In this context the FID must be well prepared, taking into account (the) scale and complexity of the project. The shareholders and SDAG are determined to continue their good and close cooperation."
Gazprom has already had one false start on Shtokman, when an earlier consortium collapsed over costs and payments. The field was discovered in 1988.
The project's backers say the sheer volume of its reserves - more than Norway's continental shelf holds, by one estimate - mean that development is inevitable but add that the project could be doomed to losses if it is rushed into production.
Under current plans, the gas is to be extracted from a depth of 340 metres by a vessel anchored at sea and then pumped 550 km to shore for processing and liquefaction.
By contrast, Yamal LNG, a rival project led by independent producer Novatek in partnership with Total, will be fed by gas from onshore fields, albeit in harsh Arctic conditions.
"There needs to be an appropriate fiscal framework for such a pioneer project in a harsh environment," Statoil spokesman Baard Glad Pedersen said, adding the company agreed on the deadline change because it continues to believe in the project.
In Paris, a Total spokesman said the additional three months would be sufficient to reach a final decision.
A second source close to the consortium said that taxes remained the single largest outstanding issue. In the weeks running up to the deadline, Statoil CEO Helge Lund and Total CEO Christophe de Margerie made public pleas for tax breaks.
The consortium has yet to receive formal tax exemptions, particularly from the 30 percent export duty Russia charges on pipeline gas. Liquefied natural gas can be exported duty-free.
Last month, a senior Finance Ministry official told Reuters that the current regime was favourable enough. Russia's government relies on oil and gas for half its budget revenues.
Formally, Shtokman is due to begin pipeline deliveries to Europe via the Nord Stream pipeline in 2016 and start shipping more costly liquefied natural gas (LNG) from 2017.
But the boom in alternative gas output in North America has effectively closed the United States as an export market that Shtokman's backers had hoped to supply and has led to a wider gas glut.
Gazprom is now seeking a home for the project's LNG in Asian countries such as Japan and India.