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DE RUEHMO #5152 2981404
ZNR UUUUU ZZH
P 251404Z OCT 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 4842
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
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RUEHNY/AMEMBASSY OSLO 1707

UNCLAS MOSCOW 005152 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR EUR/RUS, EEB/ESC/IEC GALLOGLY AND WRIGHT 
DOE FOR HARBERT, HEGBORG, EKIMOFF 
DOC FOR 4231/IEP/EUR/JBROUGHER 
NSC FOR MCKIBBEN 
 
E.O. 12958: N/A 
TAGS: ENRG EPET ECON PREL RS
SUBJECT:  Norway's StatoilHydro Joins Shtokman Gas Project 
 
Refs: 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT ACCORDINGLY.  NOT FOR 
INTERNET DISTRIBUTION. 
 
 
¶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.