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27 Jan, 2010 07:06

Stockman gas field under threat

Gazprom maybe re-thinking its plans to develop the massive Stockman gas field in the arctic as falling demand and increased competition question the economic viability of the project.

Decreasing demand and competition from other sources are calling into question the need to press ahead with the expensive project. The company's board has been meeting to consider its options.

Gapzrom's plans to conquer not just the European gas market, but also to expand into the US have hit a setback. The huge energy company had ambitions to supply 10% of America's needs within two years.

The US is planning to cover their needs on their own.

Extraction of gas from shale and coal deposits has become more efficient and more economically viable.

It is possible these new sources will mean the US will be self-reliant in gas within six years.

With such short timescales, this is affecting Gazprom's production plans and may result in no decision at all, says Mikhail Krutikhin, an analyst at Rusenergy.

“The final decision on Stockman has been delayed for over a year, and it is not clear whether they will make the decision after all, because the price of gas and energy the world over do not show any tendencies to dramatically go up. And so, at the prices of gas as they are today, the development of Stockman is absolutely non-economical.”

With the US shifting from importer to possible exporter in six to 10 years, and Qatar playing an increasingly important role in the market, liquefied natural gas, or LNG, might become the dominant commodity traded on the gas market says Uralsib chief economist, Chris Weafer.

“The directors of Gazprom will have to take much greater account of the fact that world is shifting towards LNG, it is becoming much more like the oil market in that sense and Gazprom is certainly going to have to reflect that in its long term program,” Weafer asserts.

Currently Gazprom is pushing for the construction of hugely expensive new pipelines to Northern and Southern Europe and is extending its reach into China.

But the viability of these projects depends on having a definite market for gas at a profitable price. If Europe can produce more of its own gas, or import it cheaper from elsewhere, then Gazprom's grand plans are in danger of collapse, with Stockman being just the first casualty.