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Gazprom Getting Antsy Over Entering U.S. LNG Race

Gazprom Deputy CEO Alexander Ryazanov said last week that the Russian gas monopoly intends to form a final consortium by mid year to produce and liquefy natural gas from the 113 Tcf Shtokman field in the Barents Sea for export to U.S. markets.

Ryazanov said Gazprom risks missing a window of opportunity to supply energy-hungry U.S. markets if it doesn't get going on the $10 billion Shtokman LNG project. "We need to hurry," he told reporters, according to the Associated Press. "If it keeps dragging on, we'll lose our momentum. If the consortium isn't finalized by mid year, then we won't make it."

The comments came ahead of a presidential summit this month and as U.S. and Russian officials call for increased cooperation in energy development, which has lagged behind expectations.

Gazprom already has signed memorandums with ChevronTexaco Corp., ConocoPhillips, Exxon Mobil Corp., Petro-Canada, Norway's Norsk Hydro and Statoil and others on LNG production from the Shtokman field, which is 373 miles from the coast.

"These are all very strong companies. With our memos, we aim to find partners for Shtokman deposit development and liquefied gas exports to the United States," Ryazanov said. "This search is very urgent... There will be two or three partners. As soon as we choose them, we can go to the government to negotiate on production-sharing contract terms."

Gazprom wants the foreign partners to finance part of its project obligations, he added. The choice of partners will mainly depend on which company comes up with the best terms. Equally important will be the companies' presence in the North American marketplace and their expertise in the northern exploration and production and LNG businesses.

The first stage of project development would include 1 Tcf of supply, about 80% of which would be converted to LNG and shipped overseas. Shtokman's annual production could reach more than 9 Bcf/d, according to some estimates. LNG shipments to the United States are targeted for late 2010 or 2011, Ryazanov said.

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