Gazprom says on track for year-end launch of Arctic field

Reuters

* Greenpeace activists staged protests at offshore site

* Project has been hit by several delays

MOSCOW, Oct 3 (Reuters) - Gazprom has announcedthat it is on track to begin oil production this year at thePrirazlomnoye Arctic oil project that has ignited protests fromenvironmental groups over the dangers of possible oil spills.

"As was envisaged, production is expected to start by theyear-end," Gazprom Neft Shelf, a unit of Gazprom, said in anemail to Reuters - the first public remarks by the company sinceGreenpeace activists tried to scale the production platform atRussia's first Arctic offshore oil project last month.

On Wednesday Russia charged Greenpeace activists with piracyfor their demonstration against Arctic oil drilling, which theKremlin sees as a key to Russia's future prosperity.

Arctic offshore oil and gas development is crucial forRussia, which relies on hydrocarbon sales for more than half itsbudget revenue. The Ministry of Natural Resources puts theoffshore oil resources at 100 billion tonnes, which would beenough to satisfy global demand for 25 years at currentconsumption levels.

State-controlled Rosneft, Russia's top oilproducer, has agreements with ExxonMobil, Eni and Statoil to tap the Arctic deposits. But thoseproject are unlikely to eke out any oil and gas before the2020s.

Gazprom has cited "technical reasons" for several delays tothe start of production at Prirazlomnoye, which is designed toproduce heavy, sour oil. Media reports have estimated totalinvestment in the field, discovered towards the end of theSoviet Union, at between $4 billion and $5 billion.

Prirazlomnoye has estimated reserves of 526 million barrelsof oil and Gazprom expects to reach peak production of 120,000barrels per day in seven to eight years.

Concerns over the safety of offshore oil have intensifiedafter BP's Deepwater Horizon oil rig exploded in 2010,killing 11 workers and spewing millions barrels of oil into theMexican Gulf, though Gazprom said on Thursday that it is able totackle any possible oil spills at Prirazlomnoye.

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