599 



Of the two projects, the West Siberian development appears clos- 

 est to realization. Negotiations are currently underway between Soviet 

 officials and a consortium of three American companies — Tenneco, 

 Texas Eastern Transmission Corporation, and a Halliburton Com- 

 pany subsidiary. While all of the details of the transaction are not 

 completed or agreed to and have not been officially announced, some 

 tentative figures have been published, which appear to be the basis of 

 current negotiations. 117 The entire West Siberian development would 

 cost about $7.6 billion. Of that sum, the Soviet Union would invest 

 about $1.5 billion ,for drilling, gas-gathering, and cleaning equipment. 

 The remainder would be invested by the U.S. consortium for building 

 20 liquefied natural gas tankers (costing about $2 billion) and for 

 construction of a 1,500-mile pipeline, compressors, a gas liquefication 

 plant, and loading facilities. 



The contract would run for 25 years, with gas deliveries to. the 

 United States valued at $150 million per year to begin in 1980. The 

 U.S. credit would be repaid over a 12-year period with seventy-five 

 percent of the gas deliveries used to pay off the principal and interest 

 on the loan, and the remaining twenty-five percent used to buy other 

 U.S. capital goods. After the U.S. loan was repaid., the gas deliveries 

 to the United States would continue for the duration of the contract 

 with the proceeds convertible to purchases in the United States. 



The U.S. Export-Import Bank and a consortium of private U.S. 

 banks could be expected to finance the deal. Under the terms currently 

 being discussed, the Soviet Union would receive somewhat better 

 treatment than other U.S. trade partners. No "progress payments" 

 (i.e. payments made while the project was under construction) would 

 be required. Payments would begin only after construction was com- 

 pleted and the project was in operation. The Soviets might also be 

 granted a longer-than-usual repayment period. Mr. Kearns, chairman 

 of the Eximbank, reported after lengthy discussions with Soviet of- 

 ficials in Moscow that the Eximbank's normal terms and rules of dis- 

 closure were posing problems for Soviet officials. 118 Either a U.S. de- 

 cision to compromise and give the U.S.S.R. preferred status or an un- 

 precedented disclosure of information and acceptance of commercial 

 terms by the Soviets will be required if the transaction is to be financed 

 by Eximbank. 



Moreover, the projected cost of Soviet natural gas would be consid- 

 erably higher than the present U.S. price. The U.S. companies would 

 buy the gas in Murmansk for 60 cents per thousand cubic feet and 

 spend an additional 65 cents to deliver it to an East Coast port. 



The total figure, $1.25, compares with a $0.45 delivered price for 

 U.S-produced natural gas in 1972. Although most U.S. energy special- 

 ists appear to agree that the current price is too low, few seem to argue 

 that the U.S. price should be raised to $1.25. U.S.-produced gas will 

 be more expensive in the 1980s : a recent estimate which allows for in- 

 flation puts the price of U.S. gas in 1985 at about 93 cents. 119 Moreover, 



U7 See James Flanigan, "Farewell to Adam Smith," Forbes, vol. 110, No. 11 (Dec. 1, 

 1972), pp. 25-26. 



118 New York Times, Apr. 4, 1973, p. 67. 



118 Edward W. Erickson and Robert M. Spann, "Balancing the Supply and Demand for 

 Natural Gas," In Balancing Supply and Demand for Energy in the United States. (Denver : 

 Rocky Mountain Petroleum Economics Institute, 1972), p. 105. 



