Beijing hosted today a working meeting between Alexey Miller, Chairman of the Gazprom Management Committee and Jiang Jiemin, President of China National Petroleum Corporation (CNPC). The meeting was held within the preparation for the Russian Prime Minister’s visit to the People’s Republic of China (PRC).

The parties had a constructive dialogue, during which they discussed preliminary terms and conditions of the potential agreement on gas supplies from Russia to the PRC.

In particular, a unanimous opinion was expressed that rapid pace of the Eastern Gas Program execution by Gazprom created favorable conditions for further cooperation development in the gas sector.

Background:

The September 2007 Order by the Russian Federation Industry and Energy Ministry approved the Development Program for an integrated gas production, transportation and supply system in Eastern Siberia and the Far East, taking into account potential gas exports to China and other Asia-Pacific countries (Eastern Gas Program). Gazprom was appointed by the Russian Federation Government as the Program execution coordinator.

Today Gazprom Group holds more than forty licenses for the right to use subsurface resources in Eastern Siberia and the Far East. They include the licenses for the Chayanda field in Yakutia, the Chikanskoye field in the Irkutsk Oblast, the Sobinskoye field in the Krasnoyarsk Krai and the Kirinskoye field offshore the Sakhalin Island. In July 2009 Gazprom obtained the subsurface licenses for the Kirinsky, Vostochno-Odoptinsky and Ayashsky blocks of the Sakhalin III project, as well as for the Zapadno-Kamchatsky Block.

Gazprom is successfully carrying out geological exploration in the Krasnoyarsk and Kamchatka Krais, the Irkutsk Oblast, the Republic of Sakha (Yakutia) and offshore the Sakhalin Island. In July 2009 exploration drilling was launched offshore Sakhalin.

In the area of gas trunkline facilities the Eastern Gas Program gives priority to the Sakhalin – Khabarovsk – Vladivostok gas transmission system (GTS). In July 2009 Gazprom set to constructing the gas pipeline. Construction of the Yakutia – Khabarovsk – Vladivostok GTS will start after the completion of the Sakhalin – Khabarovsk – Vladivostok GTS.

In September 2007 the Russian Federation Government adopted the decision prescribing Gazprom to get involved in the Gas Supply to the Kamchatka Oblast, Phase 1 – Gas Supply to Petropavlovsk-Kamchatsky project and set the tasks on the topical issues of the project. As part of the project Gazprom is pre-developing the Kshukskoye and Nizhne-Kvakchikskoye fields on the western coast of the Kamchatka Peninsula, as well as is constructing the Sobolevo – Petropavlovsk-Kamchatsky gas pipeline projected for commissioning in 2010. The project also stipulates construction of gas distribution networks in Petropavlovsk-Kamchatsky.

Within the Sakhalin II project (Gazprom holds the majority stake in the project) in early 2009 Russia’s first LNG plant was commissioned and Russian LNG exports started. The plant is to be brought to its nominal capacity (9.6 million tons per annum) in 2010.

Gazprom is active in shaping the Yakutia gas production center based on the Chayanda field’s reserves. The gas production forecast was updated based on the new data obtained during operations at the Chayanda oil and gas condensate field. Therefore, Gazprom requested the Russian Federation Government to additionally grant Gazprom the subsurface rights for the Srednetyungskoye, Tas-Yuryakhskoye, Sobolokh-Nedzhelinskoye and Verkhnevilyuchanskoye fields located in Yakutia.

Moreover, in order to ensure efficient gas fields development in eastern Russia it is crucial to define, as early as in 2009, the measures of state support for gas investment projects being executed in Eastern Siberia and the Far East. These may include, inter alia, “tax holidays” over the project's payback period and reduction/abolition of export duties on extracted gas.

China National Petroleum Corporation (CNPC) is the largest state-owned petroleum corporation of China (the Government holds a 100 per cent stake) and is one of the leading integrated oil and gas production companies of the world.

Incorporated in 1998 on the platform of the former PRC Ministry of Petroleum Industry, today CNPC is comprised of the companies dealing with oil and gas exploration, production, transmission, storage, as well as oil refining, petrochemicals and research. CNPC is the largest crude oil producer and supplier, and retains a dominating position in oil and gas production, processing and marketing in China. CNPC and its subsidiaries supply 79 per cent of the domestic oil market, control 95 per cent and 40 per cent of the PRC’s natural gas and petroleum derivatives markets, respectively, and are involved in international investment projects in 28 countries.

Gazprom and CNPC signed the Agreement of Strategic Cooperation on October 14, 2004 in Beijing within the official visit of the Russian Federation President Vladimir Putin to the PRC. The Agreement covers a wide spectrum of joint businesses including scrupulous discussion of issues relative to the organization of Gazprom’s natural gas deliveries to the PRC. The parties are studying the possible ways of implementing joint gas processing and gas chemical projects in eastern Russia and in third countries.

As one of successful projects in the sci-tech cooperation area it is possible to name the documentation development for a UGS facility in China performed by Gazprom VNIIGAZ.