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GAZPROM

May 15, 2013

Alexey Miller: Gazprom to develop Russia-wide Unified Gas Supply System by creating new GTS in East and connecting it to existing GTS in European part

Saint Petersburgkeeps hosting the III St. Petersburg International Gas Forum attended by Gazprom's delegation. Alexey Miller Chairman of the Company's Management Committee delivered a welcoming address at the Forum opening ceremony.

 “We set the ambitious goal of creating the eastern part of the Unified Gas Supply System of Russia. Reliable and uninterrupted gas supplies as well as the gas transmission system capacities in the East should be the same as in the western part of Russia. In the end, we will connect the western and eastern parts and create a Unified Gas Supply System of Russia in a literal sense,” said Alexey Miller.

Gazprom will operate in Eastern Russia in the same way as in other regions – comprehensively, consistently, using a market-based approach. At the same time, gas production in the East has very important features and will differ essentially from all that has been done in Western Siberia over the recent 40 years. Eastern Siberia has multicomponent, rich gas. It means that the creation of new production capacities should strictly coincide with the creation of gas processing and gas chemical capacities. “It is a totally new approach, a totally new challenge we have to meet, the one we haven't actually faced when producing gas in Western Siberia. As for the gas demand we now observe in the East, it is fully underpinned by a resource base,” said Alexey Miller.

Considering the fact that the gas market in the East is very receptive and fast growing, the Company will increase the financing of the Eastern Gas Program including geological exploration and the resource base build-up. “Russian consumers remain Gazprom's priority in the East. At the same time, in the medium term we may start supplying Asia-Pacific with gas volumes commensurate with those exported to Europe. However, pipeline gas is to be supplied only to China,” stressed Alexey Miller.

Vitaly Markelov, Deputy Chairman of the Company's Management Committee made a speech at the plenary meeting dedicated to the interaction of Russia and the Asia-Pacific countries in the oil and gas sector. He outlined the strategic lines of Gazprom's activities in Eastern Russia.

It was noted that the state-run Eastern Gas Program and Gazprom's projects in Eastern Russia would ensure considerable growth of primary energy production and would permit to create an efficient gas industry in the region as a basis for rapid socioeconomic development of Eastern Siberia and the Far East.

Vitaly Markelov pointed out that the Company's priority in Eastern Russia was to create a necessary resource base, develop gas supply and gasification of the country's eastern regions as well as enter the Asia-Pacific markets new for Russia. In addition, Eastern Russia will see the establishment of powerful processing and helium industries.

Gazprom actively develops its resource base onshore and offshore Eastern Siberia and the Far East. In particular, geological exploration in the Kirinskoye field offshore Sakhalin is totally completed, pre-development operations are in progress and production start is scheduled for the current year. Geological exploration is underway in the Yuzhno-Kirinskoye field, the Vostochno-Odoptinsky and Ayashsky blocks offshore Sakhalin, the Chayandinskoye field in Yakutia and other licensed blocks.

The Company continues consistently creating the eastern part of the Unified Gas Supply System of Russia. Gas supplies to consumers in the capital of the Kamchatka Territory started via a newly constructed gas pipeline between Sobolevo and Petropavlovsk-Kamchatsky. The first interregional gas transmission system (GTS) in the Far East linking Sakhalin, Khabarovsk and Vladivostok was commissioned allowing for the start of gas supplies to consumers in the Primorye Territory. Gazprom plans to further develop this GTS for the consumption growth purposes. Building the Power of Siberia GTS will be another important step. The GTS will unite the Irkutsk and Yakutia gas production centers and convey gas from these centers via Khabarovsk to Vladivostok.

It is planned to set up a gas processing, helium and gas chemical cluster near Blagoveshchensk (Amur Region) in order to obtain high value added products for making an additional contribution to the socioeconomic development of the region.

Despite abundant natural gas resources, the gasification level in Eastern Russia is considerably lower than throughout Russia and accounts for some 7 per cent. According to Vitaly Markelov, the Eastern Gas Program will make it possible to substantially boost this figure. Providing gas to Russian consumers is Gazprom's priority. To this end, the Company started large-scale gasification of eastern regions in parallel with the gas transmission capacities development. At present, Gazprom carries out construction, assembly and design operations at about forty inter-settlement gas pipelines in the Kamchatka, Primorye and Khabarovsk Territories and the Sakhalin Region.

A gradual increase of the share of gas as the most eco-friendly fuel in the energy mix of the Far Eastern Federal District produces a notable effect on the environment in big cities. For instance, the conversion of coal-fired CHPPs to gas in Khabarovsk and Vladivostok made it possible to considerably decrease air pollution. The conversion of motor vehicles and agricultural equipment to gas will also substantially contribute to the environmental improvement. Gazprom signed relevant programs for 2014 through 2020 with a number of eastern regions.

The Deputy Chairman of the Management Committee noted that Gazprom's proactive activities in Eastern Russia would provide for establishing there a new large center of Russian gas exports oriented towards Asia-Pacific. The Vladivostok-LNG project, which has transitioned to the investment stage, will enable the Company to strengthen its presence in the fast growing Asian market. Gazprom has already started commercial negotiations with potential buyers of Vladivostok LNG. The Company will continue commercial negotiations concerning the eastern gas supply route to China envisaging the construction of a gas branch from the Power of Siberia GTS near Blagoveshchensk.

Rounding off his speech, Vitaly Markelov pointed out the particular significance of the comprehensive governmental support to eastern projects. Gazprom executes its projects under harsh natural and climatic conditions, often with no engineering infrastructure. In this regard, the creation of a favorable tax regime in Eastern Russia as well as the improvement of pricing mechanisms in the domestic market will boost the gas industry development in the region. Moreover, the state should focus on developing the basic transportation and energy infrastructures in the regions where the projects are executed, particularly on constructing motorways, bridges and power supply lines, and including them into the state-run Program for the Socioeconomic Development of the Russian Far East and the Baikal Region.

 

 

 

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