Negotiators are scrambling to hammer out a deal before this weekend's G8 summit in St. Petersburg that would fulfill Russia's long-standing ambition to join the World Trade Organization.
If they succeed, the celebrations in Texas and California may rival any party at the Kremlin.
That's because Russia apparently will not select a Western energy company for a giant natural gas project in the Barents Sea until it concludes this trade deal with the United States, the last major hurdle it must clear before entering the global club. Two U.S. energy giants, Chevron and ConocoPhillips, are among five Western companies waiting to hear if Russia's state-owned Gazprom wants them as minority partners.
At stake is development of the Shtokman field, one of the largest offshore natural gas deposits in the world and worth an estimated $10 billion to $20 billion. About 300 miles from the northern Russian coastline in the unforgiving Barents Sea, the sprawling field contains enough natural gas to meet U.S. needs for more than five years. In 2010, Gazprom hopes to begin shipping the fuel as a supercooled liquid to the USA and Europe.
Russia boasts the world's largest natural gas reserves, nearly twice those of No. 2 Iran. Coupled with similarly massive oil fields, that has Moscow touting itself as an "energy superpower." But with natural gas output essentially flat for the past decade, Russia badly needs Western management and technology to convert its underground assets into cash. The Shtokman field, located beneath more than 1,000 feet of subzero seawater, presents special challenges. The gas first must be brought ashore through 300 miles of pipelines before being chilled to 260 degrees below zero and shipped as liquefied natural gas (LNG) in tankers.
Stacy Nieuwoudt of Pickering Energy Partners in Houston is skeptical that Gazprom can meet its ambitious schedule. "That's clearly not possible," she says.
Numerous technical, financial and political hurdles remain to be cleared before the USA gets its first shipment, analysts say. The immediate issue appears to be resolving Russia's WTO application, although neither Moscow nor Washington has explicitly linked the two issues.
President Bush earlier this week said he was optimistic agreement could be reached before the summit. Of the 149 nations in the WTO, the U.S. — citing concerns over intellectual property and the rights of foreign banks — remains the lone holdout on Russia's bid.
Western energy companies see Shtokman as a lucrative first step in a relationship that could expand to other Russian projects. Along with the U.S. firms, Statoil and Norsk Hydro of Norway and France's Total are on Gazprom's short list.
Still, Russia isn't the only country developing new LNG projects. "The capital and technology that could go to this project could go to a lot of other places as well. The Russians need to be careful they don't drag this (decision) out," says David Victor, an energy expert at Stanford University. The potential U.S. partners are staying mum. "We're not prepared to comment on any market rumors," ConocoPhillips spokesman Bill Tanner says.
