The Gazprom Management Committee has reviewed the strategy on coalbed methane (CBM) utilization.

The specialized subdivisions were tasked to put forward proposals on the top-priority CBM consuming facilities in the Kemerovo Oblast. The Management Committee gave orders to prepare an Investment Rationale for commercial development and utilization of CBM relying on the results of the testing and pilot commercial production from the top-priority reas in 2010–2012.

It was noted that Gazprom would continue cooperating with executive authorities in the area of tax incentives for CBM production projects.

The issue of the Company’s strategy on CBM utilization will be submitted to the Gazprom Board of Directors for consideration.

Background:

Gazprom takes an active part in the innovative project on CBM production in  Kuzbass as part of the assignments by the Russian Federation President.

In 2005 Gazprom created a research and testing site at the Talda field (C1+C2 gas reserves account for 45.8 billion cubic meters) in order to develop the CBM production technology. The researchers from Gazprom promgaz created Russia’s first CBM production technology there. 31 international and Russian patents were received across the entire process cycle from CBM exploration to utilization. Two-thirds of the equipment items used during the pilot project execution were made in Russia.

In 2009 pilot operation of seven exploratory wells was started at the first pilot production area of the Talda field. Gazprom dobycha Kuznetsk, a wholly owned subsidiary of Gazprom, is the license owner.

In February 2010 Gazprom launched Russia’s first CBM production project at the Talda field. Russian President Dmitry Medvedev took part in the launching ceremony.

At present, Gazprom is performing geological exploration in another prospect of Kuzbass – the Naryksko-Ostashkinskaya area.

During the plateau period, annual CBM production in Kuzbass is planned to reach some 4 billion cubic meters, with a subsequent increase to 18–21 billion cubic meters in the long term so as to meet gas demand in other Western Siberia’s southern regions.

In May 2010 Gazprom submitted proposals to the Russian Federation Government on the measures to boost CBM production. It was noted in the document that the regulatory framework had to be improved in order to raise investment attractiveness of the CBM projects featured by high capital intensity. According to Gazprom, the top-priority measure was to  categorize CBM as a new kind of natural resource through adding the “Coalbed Gas (Methane)” entry in the Russian Classified Index of Natural Resources and Underground Waters.

Tax incentives in the form of a zero tax rate for this natural resource production could become the next stage of the regulatory framework improvement and the basic means of state support.

The measures proposed by Gazprom will give an impetus to CBM production development in Russia, considerably expand the feedstock base of the national gas industry and significantly increase the operational safety in coal mines through lower CBM emissions.