Shtokman Gas Project Linked to WTO Fight
By Stephen Boykewich
Staff Writer
MOSCOW — Russia appears to be signaling to U.S. officials that if it is not admitted to the WTO, American firms will be barred from taking part in the Shtokman natural gas project. Two sources who spoke to senior Russian officials said the implicit quid pro quo has emerged in the last month. “My discussion with Russian officials has clearly suggested that while there is no formal connection” between WTO accession and participation of U.S. companies in Shtokman, “there is an informal understanding that if Russian membership in WTO is blocked, it would be considerably more difficult for American companies to win participation in Shtokman and other major Russian energy projects,” said Dmitry Simes, head of the Nixon Center, a Washington-based think tank. Many people in Washington believe there is an implied link “so obvious that it doesn’t need to be stated,” Simes said. Ariel Cohen, who heads the conservative Heritage Foundation in Washington and is close to many senior officials in the White House and on Capitol Hill, added: “In March, in my conversation with senior-level Russian decisionmakers, I found expressed skepticism and a lack of desire to proceed with Shtokman. This is driven by deterioration in U.S.-Russian relations in general and by frustration with the outspokenness of Chevron on Russian business practices in the energy sector.” The Shtokman natural gas field, in the Barents Sea, contains 3.7 trillion cubic meters of gas. Gazprom officials were expected to name their foreign partners Friday but indicated that it may be a few more weeks before they name them. The possible delay — Gazprom initially said it would decide in March — comes in the wake of the White House issuing a list of more stringent conditions for Russia’s accession to the WTO. The United States is the only major country blocking Russia’s bid to join the 149-member global trade group. U.S.-Russian energy cooperation came to a virtual standstill in 2003, with the arrest of former Yukos chief Mikhail Khodorkovsky. That move effectively ended talks between Yukos and Chevron and ExxonMobil to take a major stake in what was then Russia’s largest oil firm. U.S. companies have since expressed frustration over a lack of access to Russian energy resources and unclear terms for partnership with Russian companies. Chevron is one of five companies that made Gazprom’s shortlist to share a 49-percent stake in the Shtokman project. The project entails shipping gas to the United States and other markets in the form of liquefied natural gas, or LNG. The other companies on the short list are ConocoPhillips of the United States, Norway’s StatOil and Norsk Hydro and France’s Total. Spokespeople for Chevron, ConocoPhillips and Gazprom declined to comment on the Shtokman venture, saying that all negotiations were confidential. American companies have been demanding a bigger percentage of the joint project than Gazprom is willing to give, said Vladimir Milov, president of the Institution for Energy Policy and former head of Russia’s Federal Energy Commission from 1997 to 2001. “Companies vying for partnership today are already demanding concrete percentages,” Milov said. “If three partners are picked, they won’t get more than about 15 percent each,” while Chevron wants 25 percent, Milov said. While Gazprom is motivated primarily by commercial considerations in its choice of partners, Milov said, the WTO conflict has become so politically volatile that it now encompasses the Shtokman deal. “I have no doubt that today, the question of WTO accession will be connected with all the major issues on the table between Russia and the U.S., including American participation in Shtokman,” Milov said. Oil and gas analysts said that participation of Norsk Hydro and Statoil was virtually guaranteed, since they have crucial technical expertise in hydrocarbon extraction in the Barents Sea, but that Gazprom also has a strong commercial interest in involving one or more U.S. company. The need for a U.S. partner to ease access to the U.S. LNG market is clearly one of the reasons Chevron and ConocoPhillips made the shortlist, said Steven Dashevsky, head of research at Aton brokerage. “Without the U.S. companies involved, there will be problems entering the American market,” Milov said.
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