Russia taps mega Arctic gas field

Russia's energy giant Gazprom launched production on Tuesday at one of the world's largest natural gas fields originally discovered some 40 years ago in the frozen and hitherto inaccessible Arctic. In a live-link up from Moscow, President Vladimir Putin formally pushed the button on the start of commercial production at the Arctic deposit whose discovery by the Soviets in the early 1970s created excitement and frustration in equal measure. The Bovanenkovo field on the Yamal peninsula in extreme northwestern Siberia has what Gazprom estimates to be 4.9 trillion cubic metres (177 trillion cubic feet) of natural gas -- making it one of the world's three largest deposits. But it also lies amid permafrost and had long remained cut-off from access to pipelines or even basic communication. "The field will produce 115 billion cubic metres (4,060 billion cubic feet) of gas and that will go up to nearly 140 billion," Putin told the field's workers by live video. "This is nearly the equivalent of how much we export to Europe," Putin stressed. The giant field -- second in size in Russia only to Gazprom's Urengoi deposit to the south -- is part of an Arctic project that Gazprom has been pinning its hopes on as older wells run dry. But Gazprom exports to Europe slipped last year and remained flat in recent years amid easing global demand. "We are now facing the question of where all this gas is supposed to go," said Sberbank CIB energy analyst Valery Nesterov. "The decision to launch this field was made before the 2008 global financial crisis. A lot of things have changed since then -- including the onslaught of shale gas" from Canada and the United States. Gazprom chief executive Alexei Miller said the company intended to launch nearly 150 wells this year that feed into pipelines to Europe and replace supplies lost from the currently suspended Shtokman field project in the Barents Sea. "We intend to create an oil and gas province (in Yamal)," Putin added in the live link-up. "We will launch dozens of new promising fields," he said. A company statement separately noted that Gazprom was would create basic living conditions such as roads and electricity supplies "from the ground up" as it attracted workers to an uninviting location. Russia accounts for about 30 percent of Europe's natural gas imports and is the world's largest exporter of energy -- a dominant status that has seen EU nations pursue energy alternatives. The European Union has also infuriated Putin by launching price fixing probes into more than a dozen affiliates and partners of Gazprom that operate across Central and Eastern Europe. Putin on Tuesday criticised EU officials for "failing to always consult with partners" while making decisions about future purchases of natural gas supplies. "Their actions are not always correct from the standpoint of international law," Putin told a Kremlin energy commission.