the RUSSIA oil & gas competitive intelligence report - Report Buyer

Russia Oil and Gas Competitive Intelligence Report 2010
Previously, Gazprom intended to begin large-scale development at Kovykta by 2017. The planned
transfer of its interests to a holding company implies that even this date could be optimistic. Rosneftegaz,
chaired by the Vice-Prime Minister Igor Sechin, has never participated in any active operations,
suggesting the project will remain frozen for years to come. Although Gazprom confirmed talks with
Rosneftegaz on the Kovykta transfer, Kommersant's sources stated that no final decision had been made.
In BMI's view, even if Gazprom divests Kovykta at this stage, its monopoly on Russia's gas export means
it will re-enter the project when the economics of the projects are deemed to be sufficiently favourable.
Gazprom announced in June 2009 that it was indefinitely delaying the construction of a gas pipeline to
China after the two countries failed to come to a gas price agreement. Russia and China have been in
negotiations over gas exports since 2006, but their inability to resolve the differences resulted in the
ambitious pipeline project, which was to transport some 30bcm of gas from 2011 and up to 85bcm at a
later stage, being frozen. While Russia may previously have held the upper hand in negotiations, thanks to
its vast gas reserves and China's rapidly rising demand, Beijing is now benefiting from major new gas
import deals with Kazakhstan, Turkmenistan and Myanmar.
In May 2009, Gazprom boosted the annual budget for the Sakhalin-Vladivostok pipeline to RUB50bn
(US$1.6bn). The 1,830km pipeline is due onstream in Q311. Gazprom is also considering building an
LNG export terminal and a petrochemical facility near Vladivostok. The pipeline will link two major
projects offshore Sakhalin Island that are currently onstream, Sakhalin-I and -II, to the mainland. The
section to Khabarovsk is already operational. Initially, Sakhalin-I's gas supplies will be used to feed local
demand. In the same month Gazprom announced that it was set to buy 20% of gas produced from the
Exxon-operated Sakhalin-I, according to media reports. Tensions between Exxon and the Kremlin have
been high owing to a disagreement over marketing rights for gas from the project, with Exxon wanting to
export the gas directly at (higher) international prices and the Kremlin wanting Gazprom to buy all of
Sakhalin's I gas at (lower) domestic prices.
Gazprom and its German partner Wintershall have brought onstream the Achimgaz project in July 2008.
The US$1bn, 50:50 Achimgaz JV in Yamal is to produce nearly 1bcm of gas per annum and 6,000b/d of
condensate. The project’s lifespan is 40 years.
Gazprom announced in September 2008 plans to invest RUB23.5bn in constructing a new gas pipeline in
the Far East. The pipeline will connect the Sobolevskoe deposit with the capital of the Kamchatka region,
Petropavlovsk-Kamchatsky, and is due onstream in 2010. While it will be designed to supply the
domestic market, in the longer term it may also be used to connect remote gas reserves to the country’s
export infrastructure.
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