US Shtokman Role 'Useful,
But Not Imperative'
by John M. Biers, Dow Jones Newswires FWN Select 5/22/2006
HOUSTON May 20, 2006 (Dow Jones Commodities News Select via Comtex)
U.S. participation in a closely watched Russian natural gas project
would be "useful," but isn't "imperative" to the U.S., or to the U.S.
companies that are hoping to land the deal, Secretary of Energy Samuel
Bodman said Saturday.
In recent weeks, Russia's OAO Gazprom (GSPBEX.RS) has repeatedly
delayed announcing foreign partners on the giant, multi-billion effort
to develop the Shtokman field. U.S. oil majors Chevron Corp. (CVX) and
ConocoPhillips (COP) are competing with three European companies for
job.
"I think it would be useful, but I don't think it's imperative," Bodman
said of the importance that Gazprom select at least one U.S. company.
Bodman spoke with Dow Jones Newswires before delivering a commencement
address Saturday at the South Texas College of Law.
"I'm hopeful it will happen," he said. "But if it doesn't happen, I'm
sure they'll find other opportunities."
A Kremlin spokesman this week linked Gazprom's decision on Shtokman to
U.S. resistance to Russian entry into the World Trade Organization. The
Kremlin also has bristled at recent criticism of Russia by Vice
President Dick Cheney and other Bush administration officials. Gazprom,
of which the Russian government is the majority-owner, has denied a
political link to the Shtokman decision.
"I have not seen any indication of any blow-back" in Russia in response
to the Bush administration criticism, said Bodman, who said
ConocoPhillips and Chevron haven't expressed concerns about the Bush
administration's approach.
"I meet regularly with them, and I have not had any complaints from
them about how we're handling it," said the energy secretary, who has
prodded Russia to announce a decision ahead of the G-8 meeting in
mid-July.
"They have their own decision-making process," Bodman said of Russia.
"Often, in dealing with the Russians, they come close to making a
decision, and then the world changes and so they want to add other
factors to it."
|
BOC take over by rival Linde
22 May 2006 Industry Channel: Chemical & Process Source: The
Engineer
A strong financial showing in the first half of the year ensured that
the UK's global gas giant BOC will be in good shape when it is taken
over by German rival Linde. The £8.2bn deal is currently underway
and is due to be completed by the summer.
BOC's interim profits rose by eight per cent, a result of good
performances across its major divisions. In particular, its general gas
business Process Gas Solutions benefited from higher prices, especially
in Europe, to secure a growth in profit of 11 per cent.
And despite its overall growth being tempered by its UK performance,
the Industrial and Special Products (ISP) business performed well in
north America, Africa and the south Pacific region.
Buoyed by the solid financial performance and further contract wins
worth £70m to supply oxygen and carbon dioxide to a major shipbuilding
complex near Shanghai, the company said it was making good progress.
Chief executive Tony Isaac said: 'Our gas business continued to grow
strongly throughout the first half of the year with better volumes
overall and good recovery of high energy costs. Meanwhile, our
investment programme is gathering pace with an important hydrogen plant
commissioned in the US during March and six other major plants to be
commissioned during the year.'
Further evidence of the company's growth in China came with the
announcement that BOC and Tongji University are to build the first
hydrogen refuelling station in Shanghai. This project is part of the
Ministry of Science and Technology's national programme to
commercialise fuel cells in China and is due for completion by the end
of the year.
Tongji University and Shell — which is funding part of the project —
are working on the design, construction, maintenance and operations of
the refuelling station. BOC will provide engineering and procurement
services required to deliver the packaged hydrogen compression, storage
and other logistics to supply the new station.
Elsewhere in China, the commissioning process for the first new air
separation unit for the Taiyuan Iron and Steel supply scheme is
underway, while in the US the hydrogen plant supplying BP and Sunoco in
Toledo, Ohio, began production in March. BOC is also planning to invest
in a new 700 tonnes-a-day air separation unit in south central
Wisconsin to improve services to customers in western Ohio, Illinois
and Indiana.
|
China LNG project
Newbridge Capital $200 mln
BEIJING (AFX) 07.03.2006
Newbridge Capital LLC, one of Asia's largest private equity funds, will
invest up to 200 mln usd in a liquefied natural gas (LNG) project in
China's northwestern Xinjiang region, its Chinese partner said
today. Xinjiang Guanghui Industry Co Ltd (SHA 600256) said its
parent company Guanghui Group signed an agreement with Newbridge last
Friday. Under the agreement, Newbridge will invest 150-200 mln
usd in the LNG business of Guanghui Industry.
Earlier, state media reported that Xinjiang Guanghui Natural Gas
Development, a unit of Xinjiang Guanghui, began construction of an LNG
facility in the Xinjiang region, with an expected annual capacity of
430,000 tons.
In 2003, Xinjiang Guanghui Natural Gas Development Co also signed a
15-year contract to buy 520 mln cubic meters of natural gas from
PetroChina Tuha Oilfield Co.
China has set an initial target of boosting its gas-fired power
generating capacity to 10 pct by 2010, from the current 2.8 pct.
kelly.zang@xinhuafinance.com
|
China Xinjiang LNG
project US investment
Shanghai. May 15. INTERFAX-CHINA
The US-based Newbridge Capital will invest USD 180 mln in a liquefied
natural gas (LNG) project in Xinjiang. The US company, a private
investment group, signed an official agreement with the Xinjiang
Guanghui Group on May 10, which is responsible for the only LNG project
in Xinjiang, according to an official with the Xinjiang company.
"The investment will be used for the second phase
construction of the LNG project, which is
expected to commence construction in June or July,"
an official surnamed Mi with the Guanghui Group, a local private
investment company, told Interfax on Monday. The company
plans to expand its daily LNG processing
capacity from present 1.5-mln-cu m to 5.5-mln-cu m after it is
completed in 2008, said Mi.
The two companies reached an initial
agreement about a potential investment of USD 150-200
mln for the project in early March. The first phase has
started selling LNG to the provinces of Guangdong, Fujian, Hunan and
Zhejiang since September 2004. The LNG plant acquires
natural gas from the Tuha Oilfield in the
autonomous region and utilizes German technology. -WZ
|
China Private Equity LNG
project Xinjiang
3-7-2006 17:07:31
Newbridge invests $200MM in LNG operation
Newbridge Capital, working with Xinjiang Guanghui Industry Co, has
agreed to invest between $150MM to $200MM in an onshore Liquified
Natural Gas (LNG) project in Guanghui which will liquify the natural
gas byproduct at from PetroChina's Turpan-Hami oilfield in Xinjiang and
distribute them to consumers elsewhere in China.
The project has the potential to be highly profitable as the investment
will allow the operation to produce 4.4 bcm per year which they can
reportedly sell for a gross profit of 2.20 yuan per bcm (not including
transport costs). Excluding transport costs, this suggests
profits in the US $1 billion range annually, perhaps more if LNG demand
continues to outstrip supply in China.
Private equity firms have been active in China energy sector investing
$145 million in nine Chinese energy companies last year, according to
Thomson Financial.
|
India join US-backed gas
pipeline project
New Delhi May 20, 2006
With Iran playing tough on gas pricing, India has decided to join the
United States-backed 3.5 billion dollar
Turkmenistan-Afghanistan-Pakistan (TAP) gas pipeline project to meet
its burgeoning energy demands. "The cabinet has approved
petroleum ministry's proposal for joining the TAP project," an official
said here on Thursday night.
India had in mid-February participated for the first time as an
'observer' in the 9th meeting of the steering committee of the TAP
project and has since decided to join the project which will now be
renamed TAPI (Turkmenistan-Afghanistan-Pakistan-India pipeline), he
said.
Besides the fact that Iran was bargaining for a very high price for the
gas it wants to sell to India through Iran-Pakistan-India pipeline and
in its liquid form (LNG), the pipeline from Turkmenistan would be
easier to implement than IPI line as it already has the backing of the
Asian Development Bank (ADB).
Iran's controversial nuclear programme and Washington's strong
reservations have clearly cast a shadow on the future of the proposed
eight billion dollar Iran-Pakistan-India (IPI) pipeline.
Moreover, unlike IPI, the TAPI project does not run the risk of being
blacklisted for participation by US and European financiers and
companies.
The US has been encouraging Pakistan to abandon the IPI project and
consider TAP for meeting its gas needs.
The proposed natural gas pipeline would stretch from the
Turkmenistan/Afghanistan border in south-eastern Turkmenistan to
Multan, Pakistan (1,271km), with a 640km extension to India. The
estimated cost of the project is 2.9 billion dollars for the segment to
Pakistan and an additional 600 million dollars for the extension to
India.
"With a view to meeting the burgeoning gas demand, it is estimated that
substantial volumes of gas would need to be imported. Joining the TAP
project offers the possibility of an alternative source of gas supply
to India," said the petroleum ministry proposal without referring to
Iran.
Participation in TAP would give New Delhi leverage with Iran on the IPI
project, the official said, adding that in mid-February the Steering
Committee had given India three months to submit a formal request.
India needs around 150 million standard cubic metres (mscm) of gas per
day while its current availability, including LNG imports, is 92 mscm
daily. This demand is estimated to jump to 313 mscm per day by 2011-12.
Of the TAPI gas, India is willing to lift 70 mscm daily, the same
volume that it tabled during talks with Iran.
|
Australia Woodside Angel
field development
Woodside Energy Ltd. reported that development of the Angel gas and
condensate field off Western Australia will begin immediately following
final investment decisions by North West Shelf Venture participants
(OGJ Online, Nov. 1, 2005).
The $1.6 billion (Aus.) project will include installation of an
offshore production platform-the venture’s third major structure on
Australia’s North West Shelf-and associated infrastructure.
|
Gazprom LNG projects
Oil & Gas Journal, February 20, 2006
Gazprom signed a memorandum of understanding with Royal Dutch Shell PLC
to swap Gazprom’s shares in western Siberia’s Zapolyarnoye field for
part of Shell’s interest in the Sakhalin II project.
The transaction is expected to close sometime this year, Hattenberger
said. The memorandum calls for Gazprom to acquire as much as 25% plus
one share in Sakhalin II. Shell plans to acquire a 50% interest in
Zapolyarnoye’s Neocomian gas-condensate reservoirs, about 200 km
northeast of Urengoi gas field in northern Russia (OGJ, July 18, 2005,
p. 30).
Another LNG project Gazprom plans would liquefy gas in Russia from
Shtokman gas and condensate field awaiting development in the Barents
Sea.
Shtokman gas is “an excellent candidate for LNG” because it’s too
remote to be sold via pipeline to Europe, he said. Plans call for
development in three phases with 15 million tonnes/year each. Start-up
of the first phase is planned for 2012.
A third project is Baltic LNG, which would liquefy in a 3-5 million
tonne/year plant near St. Petersburg 700 MMcfd of about 55 bcfd of gas
Gazprom transports through the Unified Gas System. “There is not a
dedicated gas reserve or gas field position associated with the
project,” Hattenberger said of Baltic LNG. “It’s a small amount of gas
moved through a very large system that Gazprom already controls.”
|
Gazprom executive
outlines company’s plans for LNG
Paula Dittrick Oil & Gas Journal, February 20, 2006
The target market would be primarily North America, although there
would be access to the UK or western Europe. The Baltic LNG gas could
be moving to markets in 2009-10, he forecast.
“Gazprom is in a unique position because of its pipeline system in
western Europe,” Hattenberger said. Numerous countries take both
pipeline gas and LNG, he said, adding that Gazprom can access most of
those countries. ?
|
Russian Mineral Extraction
Law
Oil & Gas Journal Online, May 03, 2006
The Russian Duma is working on the Mineral Extraction Law and on a new
subsoil law, she said. The Russian government's anticipated shift to
holding auctions for oil and gas blocks instead of tenders now appears
unlikely.
International oil and gas companies operating in Russia probably will
be prevented from taking more than 49% interest in offshore fields,
Nanay said. Two-stage tender offers are expected by 2010, involving 32
blocks in the Barents, Okhotsk, and Pechora seas.
"Foreign companies will have to enter into joint ventures with Russian
companies having more than 50% interest," Nanay said.
Jonathan Russin, managing partner of Russin & Vecchi's Russian
Practice Group in the law firm's Moscow office, noted that contractors
should realize that the Sakhalin production-sharing agreements are
unique to Sakhalin. "PSAs are unlikely in future projects," Russin said
of Russia. He provides advice to the PSA operators and their
contractors working on Sakhalin projects. "Russia is an exciting legal
environment for me as a lawyer," Russin said. "It is sometimes a
frustrating environment for my clients. It will be an adventure for you
in Russia."
|
Shtokman field
awaiting development in the Barents Sea
Oil & Gas Journal Online, May 03, 2006
OAO Gazprom plans to liquefy gas in Russia from Shtokman gas and
condensate field, awaiting development in the Barents Sea. Partners for
Shtokman have yet to be announced.
Regarding Shtokman, Nanay declined to speculate as to whether it might
be on stream during 2011-15.
"The lesson of Sakhalin II is what is going to happen in Shtokman,"
Nanay said. "The timing is always going to be later, and the costs are
always going to be more" than initial estimates.
Royal Dutch Shell PLC, parent of Sakhalin Energy Investment Co. Ltd.'s
lead partner, has said costs for the Sakhalin II Phase 2 might reach
$20 billion, twice the original estimate for the entire Sakhalin II
project (OGJ, July 25, 2005, p. 26). The project also has encountered
delays related to environmental issues (OGJ, Aug. 8, 2005, p. 30).
|
Russia relying on
offshore for future production
Oil & Gas Journal Online, May 03, 2006
Shell plans to start year-round oil production, which depends on
pipeline construction, in late 2007 and LNG sales in the summer of
2008. Sakhalin II produces about 80,000 b/d during summer, with oil
moving to Japan via tanker.
Nanay said the involvement of international oil companies and service
companies will be essential for development off Russia, adding that
Russian companies lack extensive offshore experience.
"Nothing has moved very quickly for foreign companies in Russia," Nanay
noted.
|
New flow starts
from gas field off China
Oil & Gas Journal, May 15, 2006
CNOOC Ltd. started second-phase production from Dong Fang (DF) 1-1
natural gas field in Bei Bu Gulf in the western South China Sea off
China (see map, OGJ, Dec. 17, 2001, p. 60).
Initial production of 35 MMcfd of gas comes from three wells drilled in
the new phase, boosting field production to 187 MMcfd.
Second-phase development is to include 16 wells, two unmanned wellhead
platforms, two subsea pipelines, and 2 subsea cables. Design production
capacity of the second phase is 111 MMcfd. Total DF 1-1 field
production is expected to reach 98 bcf/year of gas.
Most gas produced from second-phase development will supply a methanol
project in Hainan Province.
The Yinggehai basin field lies in 63-70 m of water about 110 km off
Dong Fang City.
CNOOC Ltd. holds 100% interest in and operates the field.
|
African gas field:
East Reserves lifted
Oil & Gas Journal, May 15, 2006
Wells in Songo Songo gas field off eastern Tanzania showed a pressure
decline of less than 2% in 2005, and analysis permitted a reserves
increase despite no new drilling, said operator EastCoast Energy Corp.,
Tortola, British Virgin Islands.
Consulting engineers, relying on 2005 pressure and production data and
field remapping, hiked proved and probable reserves 14% to 560 bcf.
This amounted to a 41% rise in proved reserves to 241 bcf and a 25%
hike in proved and probable reserves to 320 bcf. Songo Songo’s five
wells produced 14.7 bcf in 2005, bringing cumulative production to 19.3
bcf since the start of commercial operation in 2004. Production peaked
at 72.8 MMcfd on Aug. 6, 2005.
Gas demand is steadily increasing around Dar es Salaam, and spare
deliverability is ample to meet contract volumes.
EastCoast Energy let a contract to Petrofac Engineering Ltd. to
identify the most efficient means of boosting capacity to 120 MMcfd
within 18 months. If a third processing train were installed, capacity
would then be limited by the 232-km, 105-110 MMcfd pipeline from the
field to Dar es Salaam.
EastCoast Energy plans to drill one or two wells on the northern part
of the Songo Songo West prospect 2 km west of the gas field in 2007.
The prospect is a tilted fault trap at the same Neocomian reservoir
level as the main field.
A small semisubmersible or jack up would drill the wells in 20 m of
water. Gas in place is estimated at a most likely 600 bcf.
The company is interpreting 328 km of seismic data shot on the Nyuni
license under a farmout from Aminex PLC, London (OGJ Online, Oct. 18,
2005).
|
Australia Gorgon LNG
decision could be delayed
Oil & Gas Journal, May 15, 2006
A final investment decision on the Gorgon LNG joint venture in
Australia could be delayed until next year, ExxonMobil Australia
Chairman Mark Nolan told reporters at an energy conference in
Australia. “There needs to be certainty about the cost before a
financial investment decision can be made,” Nolan told a news
conference May 8 during the Australian Petroleum Production &
Exploration Association at Gold Coast.
Gorgon is in the Carnavon basin off Western Australia. Nolan said he
does not anticipate a delay in the start of LNG deliveries, slated for
2010. Chevron Corp. operates the JV with a 50% interest. ExxonMobil has
25% interest, and Royal Dutch Shell PLC has 25% interest.
Nolan refused to comment on remarks from analysts that estimated
construction costs have escalated for the proposed plant that would be
built on Barrow Island.
|
Sakhalin II LNG said to
have buyers
Oil & Gas Journal, May 15, 2006
Sakhalin Energy Investment Co., set up jointly by Royal Dutch Shell
PLC, Mitsui & Co., and Mitsubishi Corp., is reported to have found
buyers for all projected output of LNG from the Sakhalin II project off
Russia’s east coast.
Sakhalin Energy in April briefed the Russian government about progress
in finding buyers. After the meeting Russia’s Energy Ministry issued a
statement saying “there are contracts for 98% of the output.” LNG will
be supplied from Sakhalin Energy’s 9.6-million tonne/year LNG plant
under construction at Prigorodnoye at Aniva Bay in the south of the
island.
The plant, Russia’s first, will have two trains, each with a capacity
of 4.8 million tonnes/year. First shipments will begin in summer 2008.
Talks with Chubu Electric Power Co. and Osaka Gas Co. are said to be
entering final stages.
The firms expect to have contracts in place for the nearly all the 9.6
million tonnes/year of capacity. Earlier, on Apr. 20, Hiroshima Gas
signed a full sales and purchase agreement (SPA) to buy 210,000
tonnes/year for 20 years.
Hiroshima Gas will use a new ice-class LNG vessel to transport the LNG
to its receiving terminal in Hatsu
|
Russian offshore
production growth
Oil & Gas Journal, May 8, 2006
A country for which offshore production probably will grow impressively
in the future is Russia.
Sakhalin Island currently is the oil and gas growth engine for the
country, which will heavily rely on offshore regions for new production
after 2010, Julia Nanay, senior director, PFC Energy, said at an OTC
breakfast.
By 2020, offshore fields could account for 20% of Russia’s total oil
and gas output, Nanay said, citing a draft strategy from the Russia
Ministry of Natural Resources. A ministry representative was on the
agenda but was not at the conference. Two thirds of Russia’s future
offshore production is expected to come from the Barents Sea and Kara
Sea, Nanay said.
Russia must implement regulations and taxes before its offshore oil and
gas assets can be developed, she noted, adding that offshore royalty
issues remain largely unaddressed.
|
Russia's Shtokman field
awaiting development in the Barents Sea
Oil & Gas Journal, May 8, 2006
OAO Gazprom plans to liquefy gas in Russia from Shtokman gas and
condensate field, awaiting development in the Barents Sea. Partners for
Shtokman have yet to be announced.
Regarding Shtokman, Nanay declined to speculate as to whether it might
be on stream during 2011-15.
“The lesson of Sakhalin II is what is going to happen in Shtokman,”
Nanay said. “The timing is always going to be later, and the costs are
always going to be more” than initial estimates.
Royal Dutch Shell PLC, parent of Sakhalin Energy Investment Co. Ltd.’s
lead partner, has said costs for the Sakhalin II Phase 2 might reach
$20 billion, twice the original estimate for the entire Sakhalin II
project (OGJ, July 25, 2005, p. 26). The project also has encountered
delays related to environmental issues (OGJ, Aug. 8, 2005, p. 30).
Shell plans to start year-round oil production, which depends on
pipeline construction, in late 2007 and LNG sales in the summer of
2008. Sakhalin II produces about 80,000 b/d during summer, with oil
moving to Japan via tanker.
Nanay said the involvement of international oil companies and service
companies will be essential for development off Russia, adding that
Russian companies lack extensive offshore experience.
“Nothing has moved very quickly for foreign companies in Russia,” Nanay
noted.
|
Russia PSAs are unlikely
in future projects
Technology maintains pace in bustling offshore industry
International oil and gas companies operating in Russia probably will
be prevented from taking more than 49% interest in offshore fields,
Nanay said. Two-stage tender offers are expected by 2010, involving 32
blocks in the Barents, Okhotsk, and Pechora seas. “Foreign companies
will have to enter into joint ventures with Russian companies having
more than 50% interest,” Nanay said.
Jonathan Russin, managing partner of Russin & Vecchi’s Russian
Practice Group in the law firm’s Moscow office, noted that contractors
should realize that the Sakhalin production-sharing agreements are
unique to Sakhalin.
“PSAs are unlikely in future projects,” Russin said of Russia. He
provides advice to the PSA operators and their contractors working on
Sakhalin projects. “Russia is an exciting legal environment for me as a
lawyer,” Russin said. “It is sometimes a frustrating environment for my
clients. It will be an adventure for you in Russia.”
|
Canada SNC-Lavalin
LNG terminal contract
2006-05-17 MONTREAL (CP)
A partnership led by engineering firm SNC-Lavalin Inc. (TSX:SNC) has
won the contract to design and build a liquefied natural gas import and
re-gasification terminal in Saint John, N.B. - the first new LNG
terminal on the East Coast of North America in decades.
The contract was awarded to SNC-CENMC GP by Canaport LNG Limited
Partnership, the companies announced Wednesday. CENMC Canada Inc. is an
affiliate of Saipem SpA.
Canaport said it has also completed agreements to transport natural gas
from the Canaport LNG Terminal to markets in Canada and the
northeastern United States via the Brunswick Pipeline and an expansion
of the Maritimes & Northeast Pipeline system in the U.S.
In addition, a contract for the terminal's offshore facilities,
including the receiving pier, went to Kiewit-Weeks-Sandwell
Partnership, a consortium of Peter Kiewit Sons Co of St. John's, N.L.;
Weeks Marine of Cranford, N.J.; and Sandwell Engineering of Vancouver.
Financial details were not disclosed in a release.
The announcements come one day after Nova Scotia energy firm Emera
(TSX:EMA) joined the race to profit from shipping gas from Atlantic
Canada to New England.
The utility firm said Tuesday it will propose a 145-kilometre pipeline,
just under a metre in diameter, between the Canaport site and
Baileyville, Me.
At the Canaport terminals, liquefied gas from Trinidad will be
converted back to gas at a terminal operated by Irving Oil Ltd. of New
Brunswick and Spanish energy giant Repsol YPF, before entering the
Emera pipeline.
Liquefied natural gas is natural gas super-cooled to liquid form for
transport by sea on giant tankers.
"This project marks a further milestone for SNC-Lavalin in the growing
LNG market sector," Jean Nehme, senior vice-president and general
manager of Montreal-based SNC-Lavalin's industrial division, said
Wednesday.
Site preparation, blasting and levelling construction work was
completed earlier this spring at the Canaport site. The LNG terminal is
scheduled to be operational in the fourth quarter of 2008.
"With today's announcements, we take two big steps towards increasing
the security of energy supply to the northeastern region of North
America and solidifying the New Brunswick energy hub," said Kenneth
Irving of Irving Oil.
The Canaport LNG terminal includes two LNG storage tanks, each with a
nominal capacity of 160,000 cubic metres. The facility, next to Irving
Oil's existing Canaport terminal, will have an initial send-out
capacity of one billion standard cubic feet per day of natural gas.
There's been a race on the East Coast recently to gain supply of
natural gas, with two other projects in the works in Nova Scotia, and
three along the coast of Maine.
|
Gas Projects Russian
Far East Eastern Siberia
May 2006 Author: Andrey Vasenev, Bisnis Representative in Khabarovsk,
Russia
Summary
A major program for the development of a unified system for production,
transportation, and distribution of natural gas in the Russian Far East
and Eastern Siberia, with a potential outlet to Pacific Rim Countries,
is currently being launched. Russian gas giant Gazprom is coordinating
the huge project. Its first stage envisions completion of the
Okha–Komsomolsk-on-Amur–Khabarovsk gas pipeline and its extension up to
Vladivostok (Primorsky Krai). The construction of the
Komsomolsk-Khabarovsk gas pipeline section will be completed by October
1, 2006. Most heat and power generating plants in Komsomolsk-on-Amur
already successfully employ natural gas. There are also plans for
gasification of Khabarovsky, Ulchsky, Nanaisky and Komsomolsky
Districts of the Khabarovsk Krai. First, the Khabarovsk region plans to
gasify municipal enterprises that currently use expensive diesel fuel
and fuel oil; then, it will convert apartments and other residences.
Gas Program Is Launched
In 2002, the Russian Government made an initial decision to build up
the gas industry and initiated development of a corresponding federal
program. The first draft of the program was completed by Gazprom and
Minpromenergo (Russian Ministry of Industry and Power Engineering) in
March 2003 and served as a baseline for further work. The document
prioritized satisfaction of domestic consumers’ demand for natural gas
and maintenance of a sustainable gas supply in Russia’s eastern
territories through expansion of a unified gas supply system to the
eastern part of the country; development of the markets for natural gas
taking into account competition from other energy resources, primarily
coal and fuel oil; and maintenance of a single export channel and
securing of long-term export prices.
In order to finalize the program, Minpromenergo established a special
working group consisting of representatives of Minpromenergo, Gazprom,
Ministry for Economic Development, Ministry for Foreign Affairs,
RosEnergo, Russian Academy of Sciences, and a large number of
sector-specific organizations. The working group will pursue its
operations up to mid-2006.
The working group is currently working on an accurate definition of the
market size for natural gas in eastern Russia and the Asian-Pacific
Region. Gas processing and emissions, and storage and utilization of
helium have also become the focus of the group. Russia currently
accounts for one-third of world reserves of helium gas. Today, the
United States is the primary exporter of helium, but the country plans
to decrease its supplies in the near future. In early April 2006,
Gazprom held a conference to discuss development of complex hydrocarbon
deposits in Eastern Siberia and Sakha (Yakutiya) Republic. These
deposits, especially Kovyktinskoye condensate gas deposit in Irkutsk
Oblast, contain huge reserves of helium. Their development is
envisioned by the program of “Energy Strategy of Russia till 2020” and
will make Russia one of the largest helium producers and suppliers in
the world. Conference participants have also agreed on a task force to
work out a strategy for complex hydrocarbon deposits development. By
2005, polyethylene and polypropylene are also expected to be in demand
on the world markets. Therefore, Russia has good prospects for
strengthening its position on the world gas and chemical products
markets.
helium
Alexander Ananenkov, the Deputy President of Gazprom, has emphasized
the helium issue during his visits to Khabarovsk. According to Mr.
Ananenkov, natural gas should not be sent to export in its “initial”
state. The gas is valuable for its so-called accompanying components,
namely methane, propane, butane, and especially helium. Mr. Ananenkov
pointed out that there should be a clear understanding that gas is not
simply fuel but is a chemical raw material. And special attention
should be focused on organization of high-value-added production. This
requires a well-developed gas processing industry. Currently, there is
no technical capability to process gas produced in the Eastern Siberia,
as well as no sufficient storage facilities. Therefore, prior to
development of a large number of gas deposits all necessary
infrastructure needs to be created.
Gas Reserves
Gazprom estimates the overall reserves of natural gas in Eastern
Siberia and the Russian Far East (RFE) at 64 trillion cubic meters.
This is 27 percent of Russia’s total. The largest share falls on
Eastern Siberian deposits, while the Sakhalin shelf accounts for nearly
15 trillion cub. m.
|
Natural Gas Reserves of
the RFE (billion cub. m.) |
Explored DepositsOverall
Reserves |
Prospective Resources |
| Sakha
Republic (Yakutiya) |
26 |
2,200.0 |
123.3 |
| Kamchatskaya
Oblast |
4 |
22.6 |
11.5 |
| Sakhalinskaya
Oblast |
50 |
946.6 |
2000.2 |
| Chukotskiy
Autonomous Region |
2 |
14.7 |
11.4 |
| Total |
82 |
3,183.9 |
2,146.2 |
In order to ensure effective development of gas resources, four centers
were identified around the largest deposits. Sakhalin center for gas
production rests upon the deposits of the shelf area of Sakhalin –
namely Sakhalin 1 and Sakhalin 2 projects and potentially Sakhalin 3-6
projects. The Irkutsk center is based on the Koviktinskoye deposit. The
development of this deposit is associated with the development of the
nearby Dulisminskoye and Markovskoye and a number of other deposits.
Gas production in Yakutiya will concentrate around the richest
Chayandinskoye deposit. Later, the neighboring Srednebotuobinskoye,
Verkhnevilyuchanskoye and Tas-Yuryakhskoye deposits will step in. In
Krasnoyarsk Krai production of natural gas will take place at
Sobinsko-Paiginskoye andYurubcheno-Takhomskoye deposits.
Development of the above four centers will be conducted in several
stages. Today, gas production takes place at the Sakhalin shelf only.
Implementation of the first step of the program for gasification of the
eastern territories is associated with Sakhalin gas. It envisions the
first-priority development of the Sakhalin shelf deposits and
development of the gas transportation system to link Sakhalin,
Khabarovsk, and Vladivostok. The gas pipeline Okha–Komsomolsk-on-Amur
is already functioning in the Khabarovsk Krai. Sakhalin gas already
entered four districts of the Krai. Its primary consumers are the
cities of Komsomolsk-on-Amur and Solnechniy. The Khabarovsk Krai
government was the initiator and the primary sponsor of the pipeline
construction. This year, Gazprom stepped in to finance further
construction of the pipeline up to Khabarovsk city. This section will
be put into operation in the early fall 2006, prior to the beginning of
the heating season. The first Khabarovsk heat and power plant (HPP-1)
is already prepared to operate on gas; the HPP-2 will be renovated in
the near future.
Further plans envision bringing the pipeline up to the Sea of Japan.
Construction of a gas main in Primorskiy Krai would begin in 2006.
According to the gasification program of Gazprom, Vladivostok will
receive gas by 2010. The municipal authorities are currently
determining the demand for gas and selecting specific routes for
pipeline sections. The Primorsky Krai authorities plan to switch over
to gas all residences and industrial enterprises in the major towns and
settlements of the region. Furthermore, Primorsky Krai envisions
construction of gas chemical enterprises. From there, gas may continue
on to the markets of China, South Korea, and other Pacific Rim
Countries. Upon the increase of gas supply to foreign markets,
Chayandinskoye deposit (Yakutiya) will join in.
Gas Markets
Gazprom considers the People’s Republic of China the most promising
market for gas. Most conservative estimates for the growth rates of
Chinese economy predict six percent annual production growth, while
Chinese themselves declare 11-13 percent. Russian gas exporters intend
to target the nearby northeastern provinces and the Bokhai bay
territories. South Korea is traditionally one of the world’s largest
consumers of liquefied natural gas. The country’s economy is not
developing as rapidly as that of China. Specialists talk of 3-5 percent
annual growth. However, Korea has already negotiated a contract with
Russia for the delivery of Russian gas under the Sakhalin-2 project. In
the future, export of gas to South Korea will grow from two to seven
billion cub. m. Japan also possesses a contract for the supply of 6
billion cub. m. of gas. The United States is also considered a
prospective buyer of RFE natural gas.
The cost of natural gas supply contracts for international consumers
are linked to that of oil on the world markets. Gazprom proceeds from a
conservative prognosis of $25-30 per barrel when calculating
approximate costs for Russia’s gas. In this case, the cost of 1,000
cubic meters of natural gas for People’s Republic of China will total
$130, for South Korean - $160.
Yet, domestic markets remain a priority for the gas producers. Today,
Russia’s eastern territories employ coal as the primary power resource.
By 2030, Gazprom forecasts a considerable increase of the share of
natural gas and decrease of the share of coal. The real volume of coal
consumption will not fall, however, as the gasification program does
not approve of reduction of the coal consumption levels.
The correlation between costs of natural gas, coal, and fuel oil on the
Russian markets today differs from that of Europe. Gas in Russia is
nearly two times cheaper than coal and 4-5 times cheaper than fuel oil,
while European costs are practically the same. Coal is 1.6 times
cheaper than natural gas.
By 2020, the estimated annual domestic demand for gas will total
approximately 44 billion cubic meters. Khabarovsk Krai will account for
4.7 billion cubic meters yearly. RFE is reported to be using gas
differently than Russia’s western territories. In the Russian Far East,
natural gas is used less in fuel and power sectors. However, its share
in gas chemistry and processing surpasses country’s average figures –
37 percent against 21 percent in Russia as a whole. This creates
prerequisites for creation of a developed gas processing industry in
the east of Russia.
The scale of the RFE gasification program is huge. Its implementation
by 2020 will require development of six large deposits, construction of
over 5.6 million kilometers of pipelines, 17 compressor stations with
the total capacity of 980 MVt, a gas processing plant, and two helium
storage facilities, as well as three underground gas storage
facilities. Implementation of this project requires dozens of millions
of dollars and involvement of extensive domestic and foreign investment.
These activities will help resolve the pressing problems associated
with gas supply to the Russian Far East industry, agriculture, and
utilities. The unique gas, oil and condensate deposits will be explored
and large-scale geological research activities will be initiated.
Key Contacts
BISNIS in Khabarovsk
18 Muravyeva-Amurskiy Street, office 401
Khabarovsk 680000, Russia
Tel/Fax: (7-4212) 306-421
Email: bisnis@vasandr.kht.ru
Contact: Andrey Vasenev, BISNIS representative
Khabarovsk Krai Ministry of Economic Development and Foreign Affairs
19 Muravyov-Amurskiy Street, Khabarovsk, 680002, Russia
Email: (7-4212) 329 739 or 325-544
Fax: (7-4212) 322-253 or 328 397
Email: econ@adm.khv.ru
www.adm.khv.ru
Contact: Alexander B. Levintal, Minister
Khabarovsk Krai Government
Division of Gasification and Implementation of Oil & Gas Projects
56 Karl Marx Street, Khabarovsk 680000
Tel: (7 4212) 328 706
Fax: (7 4212) 306 935 or 325 040
Email: pilguy@adm.khv.ru
Valeriy D. Pilguy, Head of the Division
For more information on the Russian Far East, visit BISNIS online at
http://bisnis.doc.gov/bisnis/country/fareast.cfm
BISNIS (www.bisnis.doc.gov) is part of the U.S. Commercial Service
(www.export.gov).
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