Efforts to advance the controversial project in one of the world’s most pristine ecosystems have been met time and again with the confusion and frustration of investors, critical lacks of technology to drill gas in harsh Arctic conditions, and cost overruns that have shocked even the Kremlin, which for many years had counted on Shtokman as a major economic force for Russia’s future.

“The board will decide what to do with Shtokman next week,” said Kruglov, according to the agency. “I don’t rule out that the field will be developed by a future generation. We’ll see how the market changes.”

Gazprom has for two decades been trying to develop the Shtokman Field in the Barents Sea north of the Kola Peninsula. The field is estimated to hold some 3.9 trillion cubic meters of gas, making it one of the world’s largest untapped reserves.

It is also one of the most environmentally problematic spots to extract gas on earth.

“For those who have followed the more than 20 years of history surrounding the Shtokman field, Gazprom’s announcement is neither unexpected nor surprising,” said Larisa Bronder, an advisor with Bellona.  “What is hard to understand is how tenaciously Gazprom held on to the idea of developing this field, despite its economic baselessness.”

Shale gas makes Shtokman redundant

The recent advent of shale gas in the United States, Russian media reported, makes pursuing the project even more unprofitable. America was one of the key markets to which Gazprom and its former foreign partners in the project, –France’s Total and Norway’s Statoil – had hoped to supply with gas.

Specifically, the company envisioned delivering gas to Europe via the 1224 kilometer-long Nordstream operated  Severny Potok gas pipeline laid under the Baltic Sea, at a rate of 55 billion cubic meters per year, with further plans to produce liquefied natural gas for delivery to the United States, according to the Russian daily Vedomosti.

The tables have turned over the past decade, and as Gazprom pressed ahead with a no-holds-barred approach to Arctic gas recovery, shale gas achieved by hydraulic fracturing in the United States has hit boom proportions and put the country in a position to export gas itself.

America’s shale gas bonanza “sabotaged Shtokman, which was oriented toward the American market,” Tayana Mitrova, director of the oil and gas development complex of Russia and the world department of the institute of energy studies at the Russia Academy of Sciences.

A moveable plague

But shale gas recovery has not been met with resounding environmental approval in the US, where environmental groups such as the National Resources Defense Fund and Bellona oppose moving forward with hydraulic fracturing because of possible water table contamination from the chemicals involved in the process, seismic disturbances and high releases of methane the most potent of the greenhouse gasses.

“Basically it is an equal trade off,” said Erlend Fjøsna, an advisor with Bellona. “You could argue that shale gas developments have a worse local environmental footprint,” he said, but added that “on the other hand, Shtokman gas would need a lot of energy to be either turned into liquefied natural gas for shipment to the united states, or compressed and piped all the way to Europe, so the global footprint [from Shotkman] is probably worse for that reason.”

Shtokman’s chaotic investment history

Despite the current muddle of Shtokman’s investment structure, Norway’s Statoil, is tenaciously holding onto the notion of the project’s eventual profitability, even though it no longer has any funding invested. 

In August,  Statoil gave back its 24 percent share for a write off of about 2 million Norwegian kroner ($336 million) after investors failed to meet the deadline for an agreement.

Later the same month, Total – which owns 25 percent of the Shtokman project – announced at Norway’s ONS Oil and Gas Conference that it had environmental reservations about developing Shtokman because of cost overruns and environmental concerns.

In November, however, Total CEO Christophe de Margerie told reporters his company had no intention of giving up its shares in Shtokman. Other foreign oil companies like Shell have also been sniffing out the Shtokman project.

And Statoil spokesman Bård Pederson has repeatedly told Bellona that his company wants to strike an agreement to make Shtokman profitable, and that the share hand-back was purely a formality.  Statoil has recently floated plants to locate a floating LNG production platform at sea at the Shtokman site to forego costly pipeline construction to the shore, Norwegian media reported last month. Neither Total nor Statoil immediately returned requests for comment on the latest white flag issued by Gazprom over the Shtokman project. 

While these squabbles continue, however, Gazprom, which holds the major stake in Shtokman as well as the license to the field, is casting its eye elsewhere.

Gazprom looks east

According to Vedomosti, Gazprom plans to seek financial refuge in developing the Yuzhno-Kirinskoye field in the Sea Okhotsk on the shelf of the Far East Sakhalin Islands. That field holds between 137 and 260 billion cubic meters of natural gas, yielding a condensate extraction from 16 to 30 million tons, said the paper.

Another field was discovered in the Kirinskoye region in 2011, and Gazprom’s Kruglov Friday told Interfax that the Kirinskoye deposits “has almost the same stock as the Shtokman has and is located much closer to the Asian Pacific markets.” 

The practicalities of developing the Kirinskoye deposits also seem less daunting: The Kirinskoye deposit is only 28 kilometers from shore at a depth of 28 meters, where Shtokman is located 550 kilometers from shore at a depth of 330 meters, RT.com reported.

But according to Bellona’s Bronder, these advantages are superficial.

“Now Gazprom, having made a ‘gift’ to future generations in the form of untenable gas field, is setting its sights on the South Kirinskoye field in the far east in the hopes of profiting on the Asian market,“ she said. “

“According to some analysts, the cost of the Sakhalin gas, including expenses for infrastructure development, could run as high as 600 per cubic meter.”

Grigory Birg, co-director of the analytical firm Investkafe, agreed, telling Vedomosti that the Kirinskoye projects – though boasting a yield nearly equal that projected from Shtokman – would require enormous investment that would run the project aground on the same shoals as Shtokman.

Vedomosti sources nonetheless told the paper the South Kirinskoye deposit should become the basis for a Gazprom LNG plant in Vladivostok that is due to begin operating in 2018.