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Gazprom Aims for 10% Share of North American LNG Market

Fueled by massive supplies of Arctic natural gas, Russia's OAO Gazprom may be able to supply up to 10% of the North American liquefied natural gas (LNG) market by 2020, an executive said last week. The comments appeared to confirm some made last month by a Houston-based Gazprom executive.

A substantial amount of gas from the giant Shtokman gas field in Russia's part of the Barents Sea, and Russia's holdings on the Arctic's Yamal Peninsula would be headed to U.S. and Canadian shores within 10 years, according to Gazprom Deputy CEO Alexander Medvedev. He said an estimated 17% of Shtokman's gas supplies would be targeted for North American markets.

Gazprom has slowly been building its North American business for about five years -- but that may be about to change.

Last month John Hattenberger, managing director of Gazprom Marketing & Trading USA Inc., told a GasMart 2009 audience in Chicago that up to 1.5 Bcf/d of Russian LNG would make its way to North American markets by the end of this year (see NGI, May 25).

Gazprom's North American plans by the end of 2009 include securing 100-300 MMcf/d for U.S. markets via European pipeline swaps. By 2014 Gazprom would send 500-1,000 MMcf/d to North American markets from Shtokman Phase I. From Shtokman Phases 2-3 to be finished in the future, 1,000-3,000 MMcf/d would flow to North America.

"We expect to be marketing 3-5 Bcf/d through 2020," Hattenberger said.

On Tuesday Medvedev spoke to reporters at a roundtable with Royal Dutch Shell executives.

"The volumes we have now is just 0.5% of the gas consumption in the United States," Medvedev told reporters. "But we believe that together with Shtokman and Yamal LNG, our share in the U.S. and Canada market will grow up between 5% and 10%. In general we are targeting that 70% of the Shtokman volume could reach North America. We offer 9.6 million tons of LNG."

Gazprom estimates that global LNG demand will grow at an average annual rate of 6-8% for the next few years, according to Medvedev.

The Shtokman gas field is scheduled to start producing gas for export by pipeline by 2013 and as LNG in 2014. Gazprom owns 51% of Shtokman Development AG, while France's Total holds a 25% stake and StatoilHydro owns a 24% stake. Last Friday StatoilHydro and Gazprom agreed to extend their cooperation in exploring and producing oil and gas in the Arctic region.

"Even in the current depressed pricing situation with LNG in different parts of the world and relatively low prices in Henry Hub, we still do not see any danger to the feasibility of Shtokman," Medvedev told reporters.

Gazprom also is cooperating on a feasibility study with OAO Novatek, Russia's largest nonstate gas producer, to construct an LNG facility on the Yamal Peninsula. The peninsula holds an estimated 22 trillion cubic meters of gas and could produce as much as 115 billion cubic meters/year by 2015, according to Gazprom. Gazprom owns about 20% of Novatek. Gazprom has received several proposals for the Yamal LNG project, and it is considering inviting Shell to participate, Medvedev said.

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