Shtokman Investment Decision Still Hinges (Russia)

In November of 2011, we wrote in ‘No Decision on Tax Breaks for Shtokman‘ that Shtokman Development AG (SDAG) was looking to the Russian Federation for tax breaks.  The CEO’s of Total, Statoil, and Gazprom were weary of Shtokman profitability given current tax regulations.

The three oil and gas giants were supposed to have made a final investment decision before the 2011 year end.  Due to the above mentioned issues, along with another that will follow, the decision will instead be made in March of 2012 (Read the SDAG press release here)

The next ‘hinge’ is on that of Murmansk’s decision to establish a special economic port zone in Teriberka, which is to be the Shtokman Barents Sea coast hub.  According to the Ministry of Economic Development, Gazprom is not ready to be a part of such a special economic zone as there are regulations that come with it that would need to either be abolished or changed.

  • The processing of natural resources is not allowed within a special economic zone.  This would legally prevent the operation of a LNG plant.
  • The zone term limit within any special economic zone is set at 20 years, while SDAG is expected to operate for over 25 years.
  • Firms within the special economic zone would be required to register under that zone, where SDAG is registered in Switzerland.

(Information from Izvestia.ru)

I am uncertain as to how this is going to play out.  If this project is to actually make it through the pipeline without any more lengthy delays, SDAG had better hope that there simply will be no special economic zone, or that they will be able to work with the Russian Federation in order to change some of the regulations that would be associated with such a special status.

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One Response to Shtokman Investment Decision Still Hinges (Russia)

  1. Pingback: Shtokman Development AG Changes Gears … Again – Russia « Arctic Economics

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