Statoil: We Need Commercial Concept to Justify Shtokman Investment (Russia)

Statoil is still trying to find a solution, which will allow the company to participate in the Shtokman project. Both technical and commercial challenges must however be solved before Statoil makes a final investment decision.

It was not possible to arrive at a solution for the Shtokman development within the framework of the Shtokman Development AG (SDAG) joint venture, in which Gazprom, Total and Statoil are joint owners. Statoil has therefore returned its shares in SDAG to Gazprom after the current agreement expired on 30 June.

At the same time, Statoil’s chief executive Helge Lund and senior vice president for the Europe and Asia business cluster Torgeir Kydland have left the board of the joint venture.

Senior vice president Torgeir Kydland has left the board of Shtokman Development AG, but he still believes that Statoil can play a role in the Shtokman project if the conditions are favourable.

Talks are continuing with Gazprom to try to find a commercial solution which will enable Statoil to participate in the Shtokman development.

“We need a commercial concept to justify the large investment,” says Kydland.

“We have a broad and strong portfolio of projects worldwide competing for investments, and Shtokman is competing on the same level as other projects.”

The investment decision has been postponed several times based on framework conditions, high investment costs and uncertain profitability. At the same time, the energy realities have changed. Large natural gas deposits, especially onshore USA, have impacted the gas market fundamentally.

“We have worked with Russia for several decades,” says Kydland.

“Our cooperation with the Russian authorities is good, and in May we signed a cooperation agreement with the Russian company Rosneft. We have come to Russia to stay, and if it is possible to find a common commercial solution for Shtokman we are still interested in joining the project.”

Earlier this year Statoil repatriated most the staff who were deployed to work for SDAG as part of reducing its current joint venture costs.

“The Shtokman field consists of large proven natural gas resources, and field production is possible if we find the right solutions,” says Kydland.

“We have made progress, for example we have found out that we can use the technology we have developed on the Snøhvit field to reduce costs. Russia has also taken steps towards preparing better framework conditions for offshore developments, but we still have some work ahead of us before we can sign any new agreement.”

In connection with the presentation of its second quarter results Statoil wrote down the value of SDAG by NOK 2 billion.

[mappress]
Press Release, August 9, 2012