By Carola Hoyos
Gazprom's decision to tackle the development of the giant Shtokman natural gas field on its own is the latest in a series of bold moves designed to strengthen Russia's control over its most precious natural resources.
But does Gazprom, the state monopoly, have the know-how to develop one of the world's biggest and most remote gas fields on its own or has Moscow finally taken on too tough a challenge?
Switching Shtokman from a US-bound liquefied natural gas hub - for which Gazprom would have had no previous experience - to a pipeline venture with Europe as its destination makes things somewhat easier, analysts say.
Frank Harris, analyst at Wood Mackenzie, the Edinburgh-based industry consultancy, strikes an optimistic note, saying: "You look at some of the previous things Gazprom has done, and . . . it has quite a lot of expertise. The pipeline option is right in its back yard."
But even so, the group will have some big hurdles to overcome, prompting one oil executive to give Gazprom "not a chance in hell" to complete the project alone.
Organising the tenders and supply chain in such a remote location is difficult, but most challenging is the piping of unprocessed natural gas some 500km from the field below the Arctic seas to the nearest shore. The longest such pipeline ever attempted is Statoil's as yet unfinished 120km pipe in Snovit, Norway's Arctic.
If Gazprom fails, its ambition to fashion itself as an international player on a par with the listed energy groups of Europe and the US will suffer.
Even if it succeeds in a pipeline project at Shtokman, Gazprom will have set back its goal of becoming a serious player in LNG.
For Russia, failure even to pipe the gas would not only mean lost revenue for state coffers but more trouble meeting European customers' demand.
Its redirection of Shtokman's gas away from the US is likely to ease competition among the many suppliers expected to fight for the US market at the beginning and middle of the next decade.
The US Department of Energy forecasts the capacity of the country's LNG receiving terminals will more than triple by 2015, but for subsequent growth to slow. Shtokman's LNG would most realistically have hit US shores in 2014-2017.
In fact, Mr Harris suggests this may have been part of the reason Gazprom changed its mind about sending Shtokman gas to the US. "Maybe Gazprom is looking at the fundamental market conditions expected in the US and thinking the conditions in Europe are better," he says.
For the worldwide LNG market, Gazprom's decision to go the pipeline route would leave a yearly hole of 30m tonnes at a time when delays at other projects are already causing concerns over tight supplies.
It is these kinds of challenges that could yet give international energy companies a way back into the project.
(FT.com, 11/10/06)