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Cablegate: Norway's Statoilhydro Joins Shtokman Gas Project

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DE RUEHMO #5152 2981404
ZNR UUUUU ZZH
P 251404Z OCT 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 4842
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UNCLAS MOSCOW 005152

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TAGS: ENRG EPET ECON PREL RS
SUBJECT: Norway's StatoilHydro Joins Shtokman Gas Project

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1. (U) Norway's StatoilHydro announced October 25th that it will
sign an agreement for the remaining 24% stake in the Shtokman
Development Company, which is to develop the first phase of the
giant Shtokman gas field in the Barents Sea. Gazprom had earlier
awarded France's Total a 25% share in the project. ConocoPhillips
was the other finalist among international partners considering the
deal. Gazprom will retain a controlling 51% share in the venture
and has maintained that it will own 100% of the hydrocarbon
reserves. This claim has called into question Total's announcement
that it will be able to add reserves to its books proportional to
its investment in the field.

2. (SBU) ConocoPhillips Russia V.P. Stuart Snow (protect) told us
October 25th that the tender was "very clean and transparent," and
that "the highest bidders won." He added that Total and
StatoilHydro put a lot more, "I repeat, a lot more," value on the
opportunity than did ConocoPhillips.

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COMMENT
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3. (SBU) Many analysts believe Gazprom is overvaluing the field and
that its untested business model may create headaches for the
international partners. That said, it appears that after 20 years
on the drawing board, including ten years of on-again off-again
negotiations between Gazprom and potential partners, Shtokman is
finally going to be developed. Shtokman's progress is good news for
global energy security given the field's potential 3.7 trillion
cubic meters of gas. Significant volumes of gas -- up to 23 billion
cubic meters per year -- should begin flowing sometime in the middle
of the next decade. It is also encouraging to hear that the tender
was clean and transparent.

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