Gazprom says shale gas poses environmental risks

LONDON Wed Feb 10, 2010 1:28am IST

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LONDON Feb 9 (Reuters) - Russian gas export monopoly Gazprom warned of environmental risks from shale gas drilling in the United States and Europe on Tuesday, but said it expected its gas to be able to compete with shale gas prices even if production expands.

Last week, Gazprom said it was delaying development of the Shtokman field, one of the world's largest, which it hoped would supply liquefied natural gas to the United States, citing expansion of U.S. shale gas production and the subsequent fall in U.S. gas prices.

"This technology endangers drinking water," Gazprom's deputy chief executive, Alexander Medvedev, said.

Shale gas production involves extracting gas from rock through the use of hydraulic fracturing -- where water, sand and chemicals are pumped into formations at pressures high enough to crack the rock and allow gas to escape.

Environmentalists and critics say the drilling chemicals have polluted aquifers in Pennsylvania and Colorado and can cause cancer and other serious illnesses.

Medvedev said Gazprom was keenly awaiting the results of investigations by the U.S. Environmental Protection Agency into shale gas drilling.

Medvedev said last year that Gazprom, the world's largest gas producer, aimed to take a 10 percent share of the U.S. natural gas market within five years, largely by exporting LNG, but analysts say the expansion of shale gas production makes this unlikely.

Much of the gas was supposed to come from Shtokman, which has been delayed for three years. Medvedev said that phase 1 of the project was still targeting production of 23.6 billion cubic metres a year.

He declined to confirm the $15 billion budget for the first phase as he said it was possible this could rise 25 percent to 30 percent. (Reporting by Tom Bergin; Editing by Walter Bagley)

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