Can Gazprom Realistically Meet Its Natural Gas Projections?

Gazprom (OGZPY.PK), Russia's largest company and the world's largest natural gas producer, has released projections for future expected production of natural gas until 2030 on its website, which overall show moderately growing production and comfortable maintenance of gas export capacity.

Gazprom's projections stand in contrast to doubts raised by several analysts (the reports of whom will be discussed below) as to whether or not Gazprom can maintain production at current levels. Criticism of Gazprom's future production has been mainly directed toward potential decline rates at current producing fields and the perceived lack of initiative by Gazprom to bring new fields online.

The questions concerning decline rates and new fields have led to a significant segment of the media questioning Gazprom's ability to increase future gas production. Newsweek, as an example, published an article in 12/07 titled: "Russia's Big Secret" which states as a subheadline: "Russia Can Barely Meet its Own Demand," implying heavily (although not outright stating) that Russia's future gas production will decline while domestic consumption continues to rise.

This article will analyze Gazprom's ability to meet its future projections, and address Gazprom's response to criticism. All in all, a review of Gazprom's evidence shows that Gazprom makes a strong case against key criticisms -- and it is more likely than not that Gazprom's future natural gas production will increase through 2030.

The question of future production at Gazprom holds significant importance to interested investors. Is Gazprom a firm in decline or ascension?

Key points will be discussed below.

Gazprom Overview

Gazprom is currently the world's largest natural gas producer, producing approximately 20% of the world's natural gas by volume. Gazprom is Russia's largest company -- the newly elected President Medvedev currently serves as Gazprom's chairman of the board, although a replacement is expected soon. Gazprom's currently ranks as the world's third largest publicly held firm by market capitalization at approximately $US330Bn, and has a trailing p/e ratio of approximately 14x. Gazprom is also a major oil producer through the acquisition of the Russian oil firm Sibneft in 2005, and is the fifth largest oil producer in Russia, behind TNK-BP.

How should a firm the size of Gazprom be analyzed? The main approach taken in this article -- and incidentally in criticisms of the company -- is by analyzing first and foremost the main producing natural gas fields of the firm, that is, its Exploration and Production segment. Although Gazprom does not break out revenues and earnings by division in its Annual Report or on its website, it is likely that Gazprom's internal structure is like most integrated majors in that its Exploration and Production segment comprises the majority of overall firm profits.

Overview of Gazprom's Exploration and Production Activities

Gazprom produces currently a majority (over 70%) of its Gas from four main fields -- three of which (Yamburg, Urengoy, Medvezhye) are over a decade old and are in decline -- although at what degree of decline is a key question -- and one field (Zapolyarnoye) which was brought online in 2001. (an interesting fact is that the unusual names of the fields are due to the fact that Gazprom has named them after words in local native tribal languages -- Urengoy, for example, can mean "an island in a former riverbed" in the northern Siberian Khanty language). Historical production from these fields can be seen in Figure 1 below -- note that this chart is cited most often by critics of the company -- what's important in the chart below is the historical production -- future production is in question, as will be discussed below.

Criticisms of Gazprom's Future Natural Gas Production

A summary of the criticism leveled at Gazprom can be found at the consultancy Stratfor
titled: "Gazprom's New Field and Enduring Supply Problems." Much of the data -- including the chart below -- is taken from data presented by Jonathon Stern of the Oxford Institute for Energy Studies in his book titled: The Future of Russian Gas and Gazprom (published 2005). Chart 1 has also been published by the EIA. The criticism are summarized in Chart 1 below, which shows high rates of decline at existing fields, only one new, major field brought online in 2001 (Zapolyarnoye), and in many versions (as the one below) the forecast does not list new potential fields.

Chart 1: Critical View of Gazprom's Future Natural Gas Production

(Historical until 2004, Projected 2005 Onward)

As can be seen in Chart 1, there are two main sources of controversy over future natural gas production: 1) the rate of decline of the three decade old fields -- critics point to high rates of depletion without stabilization or expansions of the 3 decade old fields, and 2) the potential to bring online new fields -- critics state at the most extreme that no new fields of giant size from the Yamal Peninsula will come online going forward, due to economic issues, difficult terrain, and/or lack of project management expertise at Gazprom -- but more commonly state that new giant fields will come online but be delayed past the planned 2011 start date.

Note that the above chart sometimes is presented as forecasting new giant fields in future years by drawing a higher line going forward but with a "?" or something to this effect (implying significant doubt as to whether the fields will be brought online).

Gazprom's View of Its Future Natural Gas Production

Gazprom -- not unexpectedly -- takes a more optimistic view of its future natural gas production, which is summarized in Chart 2 below.

Chart 2: Gazprom's Projections

Source: Gazprom's Website

Gazprom's official projections of Gas production by area in Chart 2 presents several items that differ from Chart 1. First, Gazprom projects production will be heavily dependent on the onshore Yamal Peninsula -- as distinct from the offshore Yamal (Shtokman gas field) with production starting in 2011 and then comprising about 50% of Gazprom's production by 2030. Gazprom's core current producing areas -- represented by the light blue area above and dependent on Gazrpom's current four major gas fields (Urengoy, Yamburg, Medvezhye and Zapolyarnoye) will decline gradually going forward, but still make up a large (approximately 60%) of total company production in 2020, and comprised approximately 350 bcm of annual production in that year. Note that in contrast, in the projections presented in Chart 1, the three decade old fields, only make up approximately 30% of total Gazprom production, and only produce approximately 100 bcm of gas in 2020. Gazprom as a whole is projected to produce approximately 300 bcm of gas in 2020 in Chart 1 -- as compared with approximately 580 bcm in Chart 2 -- a difference of 93% between the two forecasts in 2020.

Gazprom's Proposed Stabilizing Measures at Existing Fields

Gazprom's additions to these core fields -- to the approximately two decades old Urengoy, Yamburg and Medvedyze fields -- is projected by Gazprom to make up a significant contribution to total Company production. These additions are represented by the yellow area above -- estimated at 5% of total production in 2010 at approximately 50 bcm of annual production, and also by a lower decline rate in the light blue area in Chart 2. Certain critics (to the author's knowledge, having read the EIA, Oxford Institute for Energy Studies's presentations and material) do not address Gazprom's stabilizing measures at its Urengoy, Yamburg and Medvedyze fields. According to Gazprom, a key strategy of the firm is to stabilize production at its core fields -- production at the three core decade old fields can be stabilized by exploiting new areas of these existing fields. According to Gazprom's website:

A production decline in 2006 was mainly offset via production growth in the Pestsovaya area of the Urengoyskoye field, Zapolyarnoye field, Aneryakhinskaya area of the Yamburgskoye field, Komsomolskoye field.

Up to 2010, scheduled gas production rates will be maintained through the development of existing and new fields in the Nadym-Pur-Taz region: Yuzhno-Russkoye field, Neocomian deposits in the Zapolyarnoye and Pestsovoye fields, Kharvutinskaya area in the Yamburgskoye field, Achimov deposits in the Urengoyskoye field.

Recent production data points to more evidence for Gazprom's stabilization of existing fields: the rapid decline rates for Urengoy did not occur in 2006, (the last date for which production data is available). Urengoy produced approximately 138 bcm according to Gazprom's "Facts and Figures" Datasheet compared to the projections in Chart 1 which projected Urengoy to produce approximately 110 bcm -- a difference of 25% in only two years (chart 1 was completed with data historical data from 2004).

Russian petroleum geologists V. I. Marinin and V. A. Isotomin presented two papers in 2006 at the 23 World Gas Conference addressing expansion of the Urengoy gas field: Prospects of Resource Increase of Urengoy Complex and New Technologies of Gas Production at the Urengoy Gas-Condensate Complex which both argue that new areas of the Urengoy gas field can be developed, which will stabilize overall production. The papers present data that the Urengoy gas field is a multi-layer, complex and geographically large (the Urengoy gas deposit is over 120 km long) with several undeveloped segments.

Gazprom's Proposed New Fields: The Yamal Peninsula

According to Gazprom's website, production is projected by Gazrpom to hold steady through about 2013 without the contribution of the Yamal Peninsula, which is forecasted to come online in 2011 -- giving Gazprom a significant cushion in which to bring online Yamal before production declines. The Yamal Peninsula has three major fields, the largest of which is the giant Bovanenkovskoye gas field with reserves at an estimated 4.4 tcm (equivalent to approximately 23 bn barrels of oil equivalent) (Reference see page 26 of Gazprom's stats and figures 2002-2006 data sheet here). The Bovanenkovskoye field is approximately the same size as Urengoy and Yamberg according to Gazprom -- reserves of these fields are estimated at 5.3 tcm and 3.8 tcm, respectively. Production is estimated to come online at 2011 and produce 115 bcm per year by 2019.

Gazprom has budgeted approximately $4Bn to Bovanenkovskoye in 2008 out of a total capital budget of $25Bn, and has budgeted approximately half the Company's exploration and production budget on other areas associated with the Yamal Peninsula in 2008.

Can Gazprom Bring Yamal Peninsula Production Online?

There is less debate as to whether or not the natural gas exists in meaningful quantities in the Yamal Peninsula -- the US Geological Survey has consistently rated Gazprom as having the largest reserves of natural gas in the world, with only a fraction developed -- more debated by critics is whether or not Gazprom has the project management expertise and/or initiative to bring these new fields online. 2008 the first year that Gazprom has dedicated significant funds towards developing infrastructure and field development in the Yamal Peninsula. There were earlier reports that the Bovanenkovskoye field would be developed as early as 2000, however, Gazprom has not included Yamal-based projects as a major expenditure in its budget as the firm as been more busy doing acquisitions (which has subjected the firm to criticism apart from the decline rates and "lack of prospects" as described above).

Additionally, Gazprom has focused on bringing its massive Zapolyarnoye field online in 2001. According to the Deputy Chairman of Gazprom, Alexander Ryazakov, Gazprom has been confident of the productive capacity of its 3 major fields so Yamal has not been a priority until recently. (Quote by Ryazakov below is from a question and answer session in 2004 which can be found here):

We still see prospects in withdrawing gas at the Yamal Peninsula containing huge reserves. We’re very likely to do it but, in my opinion, the local gas production and marketing home and abroad are not that interesting for us, at present. We’ve endeavored so far to operate on the traditional extraction sites, developing there the existing fields. And some 5, 6, may be 8 years later we’ll move on to the Yamal Peninsula.

Gazprom bought online the massive Zapolyarnoye field in 2001, which is currently producing approximately 100 bcm per year of natural gas -- some critics have alleged that Gazprom has not brought online any fields since 1991 (as in the Newsweek article cited above) but this is incorrect.

Note: Other Projections of Gazprom's Future Gas Production

Jean Laherrere, who has worked for over 30 years as a Petroleum Geologist at Total (biography here) has provided the following Chart of forecasted natural gas production at Gazprom. As seen below, Laherrere has forecasted overall increasing production, driven by the development of new fields -- note that Laherrere's decline rates are faster than Gazprom's projections, but, as a knowledgeable petroleum geologist, he does not discount the extent of production from new fields. It should be noted that other sources have Laherrere projecting declines for Gazprom past 2030 (source here) -- the projections below only go out to 2020.

Chart 3: Laherrere Forecast of Gazprom Natural Gas Production

Source: 321 Energy

Laherrere is a member of the Association for the Study of Peak Oil and Gas, and has projected a near term peak in oil production, so his projections may lie on the conservative side -- it is noted that Laherrere has projected only 60 bcm in final annual production while Gazprom has reported that Zapolyarnoye production reached 100 bcm in 2004 (the projections are a bit dated with historical data beginning in 2001). Even with the conservative projections, Laherrere has projected an increase in Gazprom production through 2020.

Note: Gazprom Does Not Produce from a Single Dominant Field

It should be noted that Urengoy has been labeled by some as "Gazprom's Ghawar" -- Ghawar as the largest oil field in the world, held by Saudi Aramco (Saudi Arabia's national oil company). Saudi Aramco is heavily dependent on its massive Ghawar oil field -- the world's largest oil field -- which produces slightly more than 50% of Saudi Aramco's total oil production. Gazprom, despite certain reports to the contrary, does not hold a single dominant gas field to the same degree as Saudi Aramco, as shown in Chart 1 and 2 above. This distinction is important in that the declines from Urengoy and other Gazprom fields can be more easily replaced going forward verses potential declines from one massive field, without another single, massive field ready to be brought online in the near future.

Further, Urengoy -- or any other Gazprom owned Gas field -- cannot be compared in size to Ghawar. In the natural gas world, only the Pars natural gas field, which is held by both Iran and Qatar, can be compared to Ghawar in terms of reserves (note that the Pars natural gas field is approximately 5 times larger from a reserve basis than Urengoy). Gazprom's Yamal Peninsula and Northern Siberian regions are major gas reserve regions as shown in Chart 4 below, but this region does not contain a single field where the majority of reserves are located:

Chart 4: Reserve Distribution of Gazprom's Gas Assets

Source: Gazprom's website

Note: Dark blue areas represent undeveloped resources of natural gas, and yellow areas represent proven and producing areas of natural gas under the Russian classification system for reserve reporting.

Conclusion

Gazprom has provided projections and supporting evidence that address the extent of production declines at existing fields, and the timing and size of future field production rates. Gazprom has made a persuasive argument that Gazprom's three decade old fields -- Urengoy, Yamburg and Medvezhye are large in terms of territory -- each approximately 100 km in length -- allowing for development of subsections of each field, which, in turn, allows for some stabilization of natural gas production. Gazprom is currently allocating a high percentage of its current budget to the development of the Bovanenkovskoye gas field and the Yamal Peninsula, and has shown ability to bring new projects online as evidenced by the commissioning of Zapolyarnoye in 2001.

Overall, the majority of evidence points to additional natural gas production stabilization and moderate growth for Gazprom. Note that this article did not cover economic costs of developing new fields -- including pay back periods under certain cost and natural gas price assumptions, and did not fully address the timing and risk of delays of production at the Yamal Peninsula.

Disclosure: the author holds a long position in Gazprom

Comments

[ironist15:]

Very informative article - thanks! I have a tangential concern about Gazprom (which I own), which is that the Russian government subsidizes domestic consumption. This means that predicting company profit potential is difficult. The profits will be made in exports, but there will be populist pressures to forego exports and continue to subsidize doemstic consumption. Do you have any thoughts about that aspect of the business, Randy?

2008 May 13 09:52 AM

[really?:]

No mention of Turkmenistan?

2008 May 13 11:52 AM

[Randy Kirk:]

Chris Crawford -- thanks for that comment -- Gazprom plans to raise domestic gas prices by over 20% annual over the next few years, bringing them to parity with international levels by 2011 -- reference here: www.iht.com/articles/2... This will of course help overall revenues but also encourage domestic (Russian) conservation of natural gas usage.

2008 May 13 02:13 PM

[ironist15:]

Thanks again, Randy. I read the IHT article. Now I hope the Russian government plays an honest game w.r.t. Western investors.

2008 May 13 03:26 PM

[Randy Kirk:]

Turkmenistan is an interesting case - Gazprom currently transits approximately 50 bcm per year from Turkmenistan (compared to Gazprom's own production of approximately 550 bcm)(note that certain sources disagree on the total amount transited from Turkmenistan) and collects a good margin on these sales. I'll estimate the amount of profit Gazprom derives from Turkmenistan sales here (as Gazprom does not disclose this): assuming about a 30% margin on natural gas sales from Turkmenistan (30% margin is the price paid to Turkmenistan minus transit costs and tariffs) the calculation is:

50 bcm annual transit* 30% margin, price of $9.00 per mcfe, = approximately $US2.0Bn annual profit to Gazprom from Turkmenistan's production. This would comprise about 8.3% of Gazprom's expected net profit for 2007 of $US24Bn (official Gazprom results will be released May 15, 2008)

Also to put Turkmen production in perspective: Turkmenistan is producing about 63 bcm per year according to the EIA while Gazprom produces 550 bcm annually.

In Chart 1 above, Turkmenistan gas is part of the "gray area" in the projections, -- the other parts of the gray area are non-Gazprom owned natural gas production -- such as Lukoil and Rosneft production of natural gas (which is growing) -- Gazprom estimates that Russian independent production ie Lukoil and Rosneft, etc of natural gas will grow to 82 bcm annually in 2010 from 62 bcm annually in 2006 (reference: eng.gazpromquestions.r...). The gray area in Chart 1 above also includes future natural gas production from other Central Asian countries -- mainly Kazakhstan.

In Chart 2 above, Gazprom's official projections, Turkmenistan gas is not included as the transit profit is included in Gazprom's pipeline segment -- Gazprom believes it can increase production without additional supplies of gas from Turkmenistan.

Turkmenistan and Gazprom signed a 25 year supply agreement in 2003 for approximately 80 bcm per year of natural gas sales, -- however Turkmenistan is only delivering approximately 50 bcm in 2007 according to the Russian i-bank Troika Dialog -- with the price I believe undisclosed. Turkmenistan is also targeting Chinese sales through development of new fields -- estimated at 40 bcm per year with a new agreement with PetroChina beginning in the 2010 time range. Turkmenistan has also targeted India and Iran for future natural gas sales through new projects. Overall Turkmenistan has ambitious growth targets, at over 100 bcm of production by 2010.

I noted Turkmenistan has a UK based geological firm Gaffney Cline currently auditing their reserves of natural gas, which is expected to be completed by the end of 2008 -- by this time, there will be more clarity whether or not Turkmenistan can meet its Russian and Chinese (and Indian and Iranian) prospects. I noted that Chinese petroleum geologists have audited their section of Turkmenistan's gas fields and have found significantly more natural gas (1.6 tcm) than Turkmen specialists (source: Turkmenistan Plays with Europe's Gas Hopes, Asia Pulse, March 13, 2008) -- this gives some initial confidence than Turkmenistan can meet its proposed projects, but again more confidence will either be gained or not at the end of 2008 when Gaffney Cline completes its audit.

2008 May 13 05:34 PM

[adamnb:]

My compliments on an excellent and well thought out article. One question: what's the potential for Sakhalin?

I'm also a GZP shareholder.

2008 May 13 06:31 PM

[Randy Kirk:]

Thanks Adamnb. My understanding of Sakhalin, is that Rosneft holds a larger position in the overall development although Gazprom wants to overturn this (and has the political will to do so). Gazprom is relatively new in the project having acquired a 50% plus 1 stake last year at Sakhalin 2. Sakhalin is being developed in 4 phases, with Rosneft and Exxon controling Sakhalin 1, which is up and running currently with an estimated 250,000 barrels per day of oil production and also 140 M mcfe a day of natural gas (reference: www.eia.doe.gov/emeu/c...) Gazprom is not currently participating in Sakhalin 1 although wants to buy out Exxon's stake (Exxon at 30%, Rosneft at 20% ownership, of Sakhalin 1).

Gazprom is planning to start shipping LNG from Sakhalin 2 in 2009, at an estimated 9.6M tonnes annual rate, which is approximately equal to 84,000 barrels per day of oil equivalent -- Gazprom will get 50% of the revenues from this so this means it will likely not be a major percentage of overall production (as Gazprom's natural gas production is equivalent to approx. 9.5 M barrels per day oil equivalent). I am not sure if the production levels are expected to increase going forward.

Gazprom is also positioning itself to control all delivery of natural gas from Sakhalin -- whether produced by a Rosneft led consortium or not -- and so, if successful, this would be a boost to Gazprom's downstream segment.

Overall, Sakhalin is a potentially large oil and gas production region as the EIA estimates that there are approximately 12 bn barrels of oil and 90 tcf of natural gas (approximately 15 bn barrels of oil equiv) of reserves -- it is not clear if this is recoverable oil or oil in place, however. What is potentially interesting from an investor's standpoint (in my opinion) is if Gazprom Neft participates in Sakhalin 2 -- currently Gazprom Neft is participating in exploratory work in Sakhalin 4, which is not expected to come online for several years. Gazprom Neft generally produces the majority of Gazprom's oil production, and there should be significant oil production at Sakhalin 2 with an estimated 1 billion barrels of liquids reserves estimated (in addition to the 3 bn barrels of oil equivalent in natural gas reserves (see: www.eia.doe.gov/emeu/c...) - -however the liquids may be "natural gas liquids" in which case Gazprom would likely not bring in Gazprom Neft. Note that Gazprom Neft trades as a separate company -- 75% owned by Gazprom, ticker: GZPFY.

Overall Sakhalin should be placed in perspective to the Yamal Peninsula, as shown in Figure 4 in the article above, Yamal is a much larger reserve area, -- although Sakhalin in that figure only includes Gazprom's 50% ownership of Sakhalin 2, if Gazprom moves into Sakhalin 1 then Figure 4's estimated reserves would increase.

2008 May 14 02:18 PM

[Piggybank:]

I own a position in Gazprom to, not to large.

A fairly well witten article with multiple perspective's and fair objectivity.

Just to note that th Gazprom president, just became President ... of Russia! I guess you know that Medvedev is now presiden, but how will it factor in? Any thoughts on it? Last time that ive seen a president of a major nation become president .....

2008 May 14 05:38 PM

[Piggybank:]

I meant president of a major oil company become president of a nation in the last paragraph. My bad.

2008 May 14 05:39 PM

[Randy Kirk:]

Medvedev has actually been serving as Deputy Prime Minister as well as Chairman of Gazprom prior to his election as President -- although recently Andre Miller -- currently the CEO of Gazprom -- has been named Chairman, replacing Medvedev. There is a debate within Russia on how much power Medvedev actually will have, given that Putin has been sworn in as Prime Minister. However, Medvedev does represent the "pro-Gazprom" faction -- mainly verses Gazprom's main rival firm, Rosneft -- and is expected to influence the government to award many new oil and gas discoveries to Gazprom. This can be seen in the development of Sakhalin Island, which two years ago was more the domain of Rosneft, but last year Gazprom bought a majority share in Sakhalin 2, after environmental and tax authorities levied fines on the existing operators, making it more convenient for them to sell their shares to Gazprom. Currently, Gazprom is maneuvering to buy a majority stake in Sakhalin 1 (as I noted above) and in addition, control distribution of natural gas from Sakhalin -- the governmental support will assist in Gazprom achieving these objectives, most likely.

2008 May 15 12:56 AM

[adamnb:]

Dear Randy:

I think you're batting one thousand. I'd like to contact you personally to talk business. How do I go about it? By the way, beside Gazprom, I also own Lukoil and Surgutneft.

2008 May 16 08:14 PM

[Randy Kirk:]

Adamnb -- thanks for the compliment, -- you can contact me at kirkrm (at) yahoo.com -- or follow the link above to my blog which has my email address. Although I'm not always right -- however try to get my reasoning right -- as Robert Rubin says, there's always a probability that the investment won't work out, but over the long haul you'll be do well if you have solid reasoning for your investment decision.

2008 May 19 12:32 PM

[George2000:]

How about the huge Stokman field of the coast og Northern Siberia to be developed with the help of the Norvegian giant Statsoil?

2008 May 23 01:03 PM

[Randy Kirk:]

George2000, thanks for that comment. The Shtokman gas field is very large with an estimated 3.8 tcm of reserves -- equivalent to approximately 24 billion barrels of oil equivalent -- note however that the Shtokman field is not the largest known offshore gas field in the world (as has been reported in some circles) as the South Pars Natural Gas field split geographically between Iran and Qatar is significantly larger, at an estimated 51 tcm of natural gas reserves.
Shtokman therefore appears to be in the same range in terms of reserves as Gazprom's existing four producing fields.

Further, as a background, Shtokman should also be placed in perspective in terms of its potential for the Barents Sea: there is a map of potential gas and oil fields here in the Barents and Kara Seas: www.environmenttimes.n...
Gazprom officials have stated that there will be "significantly more" natural gas reserves in the Kara Sea, to the East of the Barents Sea. There is also likely to be more discoveries in the Russian and Scandinavian territories of the Barents Sea, in addition to Shtokman.

Shtokman appears to be moving forward currently - there has been serious criticism of Gazprom that it will not be able to develop Shtokman on time (with the first phase slated for 2013-2014), some of this criticism stemming from Gazprom's announcement that it would develop Shtokman alone in mid 2006. However, several observers, including the Russian Investment bank UralSib and the Jamestown Foundation, stated that this announcement was more a bargaining move to extract better terms from international partners (see: www.jamestown.org/edm/...). Gazprom has announced the signing of Total at 25% and StatoilHydro at 24% ownership of Phase 1 of Shtokman at the beginning of this year.

Shtokman is intended to be developed in 4 phases, with the first phase planned to be completed by 2014, and between 20-30 bcm of natural gas produced during phase 1. Costs for phase 1 are estimated between $15B and $20B -- but could go higher. It is noted that StatoilHydro developed the only other offshore Barents Sea gas field Snohvit, significantly closer to land and significantly smaller at approx. 200 bcm of reserves was completed for a final price tag of approx $10Bn. see for information on Snohvit: (note that StatoilHydro developed Snohvit, gaining expertise that will be valuable in producing Shtokman): www.offshore-technolog.../

After phase 1, current agreements are for Gazprom to buy out both Total and StatoilHydro from the project. Each phase is planned to add approximately 23.7 bcm of natural gas production per year -- 23.7 bcm is approximately equal to 410,000 barrels of oil equivalent per day. (see www.barentsobserver.co...
for reference)

Most likely, the project will be somewhat delayed due to the fact that the field lies in very difficult conditions, 650 km away from the mainland -- so it is theorized that a refueling station for helicopters will have to be built, and the underwater terrain is reported to be uneven. The Russian newspaper Kommersant reported on May 6, 2008 that StatoilHydro "doubts" that Shtokman will start up as planned in 2013. How much delay past 2013 is not known at this time.

Overall, Shtokman is an important future project for Gazprom, with a possible 70 bcm of annual production by 2020, compared to a current production of approximately 550 bcm. It should be noted that Shtokman production is not included in the official Gazprom projections presented above, -- Shtokman is distinct from the Ob and Taz Bay regions and the Offshore Yamal Peninsula regions indicated in the projections. I don't know why Gazprom did not include Shtokman in its official projections.

2008 May 27 05:54 PM

[Randy Kirk:]

Note: Correction in the comments section above: Gazprom's President and CEO's name is "Alexei Miller" not "Andre Miller," and Viktor Zubkov, current head of the cabinet, is widely expected to be elected Chairman of Gazprom in June, allowing Miller to concentrate on his role as President. see: www.reuters.com/articl...

2008 May 27 06:00 PM

[Objectivity:]

Mr. Kirk does an admirable job with an overall analysis of Gazprom...

The real issue, if you are a Gazprom stockholder, is that the stock has been artificially suppressed for quite some time. Reports like the IEA piece shown above is intentionally made for this purpose, I might add. Gazprom meanwhile is under slow accumulation by these same suppressor-instigators... who all the while have been attempting to engineer a Political disruption within Russia's Political-Economic-Def... space that will allow these same elements to snatch up the pieces of a broken Gazprom. Why? So as to leverage them out again for windfall profit to the Western holders and creators of trillions of nearly worthless USFED paper and associated created in an eyeblink electronic blips, so as to pull off a bloodless resource grab dwarfing "Operation Snatch Iraq".

Doubt it?

Stay tuned.

2008 Aug 01 02:45 PM