Pechora LNG Gets ‘Positive’ Gazprom Review After Shtokman Delays

Pechora LNG expects plans with OAO Gazprom to tap Arctic deposits and produce liquefied natural gas to move forward as the Russian export monopoly’s Shtokman gas project suffers further delays.

Pechora LNG, which holds rights to a deposit blasted with a nuclear explosive during the Soviet era, could generate an internal rate of return of as high as 28 percent, Maxim Barsky, head of the project, said today from Naryan-Mar, Russia, citing a study carried out by a Gazprom research center.

“It was very positive,” said Barsky, who was once set to become chief executive officer of TNK-BP, Russia’s third-largest oil company. Barsky is a minority shareholder in the Pechora project, controlled by businessman Dmitry Bosov’s Alltech.

Gazprom’s Shtokman Development AG venture with Total SA (FP) and Statoil ASA (STL) lapsed over cost concerns this year. The companies are reviewing how to proceed on Shtokman, where more reserves than world uses in a year lie untapped 600 kilometers off the Barents Sea coast. Its Sakhalin-2 project with Royal Dutch Shell Plc (RDSA) remains Russia’s only producer of LNG, gas cooled to a liquid for shipment by tanker.

Pechora LNG plans to start output of LNG in 2018, RIA Novosti reported today, citing Bosov in Naryan-Mar.

Gazprom’s press service declined to immediately comment when called by Bloomberg News.

Nuclear Detonation

The study looked at LNG output of 2 million metric tons to 8 million tons using fuel from Pechora LNG’s fields, Gazprom fields and undistributed deposits in the region.

Nenets Regional Governor Igor Fedorov has lobbied to develop the project, forming a working group with Pechora LNG and Gazprom’s export arm, according to Pechora LNG’s website. Gazprom holds a monopoly on Russian gas exports.

The group commissioned the study from OAO Giprospetsgaz, Gazprom’s St. Petersburg-based research institute, to make sure Pechora LNG’s research met the state exporter’s internal standards, Barsky said.

Soviet authorities in 1980 detonated a civil nuclear device at one of Pechora LNG’s two fields, Kumzhinskoye, after a well explosion, known as a blow-out, seeking to extinguish the blaze. Radiation at the field does not currently exceed norms, Pechora LNG said on its website.

To contact the reporter on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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