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Important Development Projects in Russia: their Impact on the Area and People’s Lives. The Shtokman Gas Field – Thinking the Unthinkable

The Russian Government has adopted the concept of the long-term development for the period up to 2020, which envisages an economy based on innovation and leading-edge technologies. This can only be achieved, as Russian President Dmitry Medvedev has repeatedly stressed in his addresses to the nation, through the implementation of important development projects in all branches of economy [1]. However, a number of high-profile projects have been abandoned due to the mounting economic crisis (for example, construction tycoon Sergei Polonsky has become the latest casualty of the crisis after his debt-laden company Mirax suspended financing on its activities and especially on its landmark Federation Tower in Moscow [2]). There is also a process of marking time in the implementation of other projects, the Shtokman gas field among them.

With 3.2 trillion cubic metres of gas stored deep under the icy Barents Sea, the Shtokman gas field is a cornerstone of Russia’s gas policy. Once developed, this $ 20 billion project will yield up to 70 billion cubic metres a year destined for Western Europe via the Nord Stream pipeline, thus securing Russia’s position as the chief energy supplier of the continent for decades to come [3]. However, quite in line with Edmund Burke’s words, ‘it is the nature of all greatness not to be exact’ [4], the developers do not seem to have any precise idea when the project will actually get underway.

The Shtokman Development CEO has recently explained that the planning stage is complete and that the developers have entered the investment stage, with a final investment decision involving all partners to be possibly made in 2010 and gas production to start in 2015. Many experts suggest, however, that the project might be uneconomical at today’s gas prices and because of the precarious economic situation. Besides, the perspective investors have a very vague notion as to how exactly such a difficult project will be implemented. The field is too far out in the sea. 600 km is undoubtedly too much [5]. So, do the developers and Russia’s government think the unthinkable?

The answer is apparently ‘no’. To think the unthinkable you have to be bolder than this. The ultimate benefits of the project by far outweigh the initial disadvantages, providing the case for its fast implementation. First, with the now-available technology developed to gain access to condensed gas stores 350 metres below the surface of an icy sea, Shtokman would pave the way for the development of other Arctic fields, whose gas stores are infinitely vast [5]. Second, the investment drawn from the project would be a boon for Russia’s impoverished northwest regions, providing for the creation of thousands of workplaces and for an improved infrastructure. Murmansk, for instance, would be turned into an Arctic transportation hub. And last but not least, the Shtokman project is very science-intensive. If it gets underway, it will provide a powerful incentive to the related industries to develop and implement new technologies. This conforms to the philosophy of the present-day Russia’s development, which implies that by 2014-2017 the share of the science-intensive products should equal the share of the traditional sectors of economy in GDP, exceeding the share of the oil-and-gas complex [1]. So, if the project succeeds its economic and symbolic importance will be immense.

Fine, you say, but how would we ever get from here to there? Hard to say, admittedly. Some participants of the first Murmansk Economic Forum on Arctic Development held October 15-17, 2009 conceded that there was a sense of more talk than action. For the investors hoping for a piece of the Shtokman pie, the forum was primarily a venue to get to know each other. A participant from the US said that he had got a sense that the forum, which sought to raise confidence in the Shtokman project, was mostly about asking for money. To put it in a nutshell, raise the money and the idea will be thinkable! In the cold light of day, however, it can be very problematic, as foreign investors do not place too much confidence in the ailing Russian economy.

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