Gazprom's delegation is taking part in the 17th Sakhalin Oil & Gas 2013 International Conference. Viktor Timoshilov, Deputy Head of the Project Management Department – Head of the East-Oriented Project Coordination Directorate presented his speech named Sakhalin Region Gasification.

The speaker noted that Gazprom and the Sakhalin Region Government were involved in the scheduled activity aimed at the regional gasification development. In addition to the existing infrastructure in Yuzhno-Sakhalinsk, Gazprom commissioned in 2012 two inter-settlement gas pipelines with a total length of some 17 kilometers from the Dalneye gas distribution station (GDS). This year the Company completed an 8.8 kilometer inter-settlement gas pipeline from the Novo-Alexandrovsk gas distribution point to the city.

The gasification program resulted in a significant increase of gas supplies to Yuzhno-Sakhalinsk. For instance, in 2012 the city received five times more gas – 313 million cubic meters – from the Sakhalin II project than in the previous year. Natural gas is winning new consumers in the power segment as well: in 2013 the fourth power generation unit of the Yuzhno-Sakhalinsk CHPP-1 was converted to gas. The growing demand brought about the full loading of the Dalneye GDS and created the need to build the second GDS within the city.

Gasification of Yuzhno-Sakhalinsk improved the ecological situation in the city and caused a material abatement of air emissions. The conversion of the Yuzhno-Sakhalinsk CHPP-1 resulted in a twofold emissions reduction: from 14.5 thousand tons in 2009 to 7.2 thousand tons in 2012. In general, the emissions lowered from 18.9 thousand tons to 10 thousand tons throughout Yuzhno-Sakhalinsk over the same period of time.

“Gazprom is not confined to Yuzhno-Sakhalinsk when developing gasification of the Sakhalin Island. The regional gasification program provides for constructing gas pipeline branches, GDSs and inter-settlement branches in the Dolinsk, Tymovskoye and Makarov Districts as well as connecting them to the gas trunkline of the Sakhalin II project,” said Viktor Timoshilov.

Before late 2014 Gazprom plans to build gasification facilities (two gas pipeline branches, two GDSs and two inter-settlement gas pipelines) in the Nogliki and Tymovskoye Districts. Moreover, the Company is going to conduct design and survey operations in 2014 for gasification facilities in the Dolinsk and Makarov Districts. Gazprom also approves the request of the regional government regarding gas supply to the Korsakov, Smirnykh and other municipalities of the Sakhalin Region.

Viktor Timoshilov touched upon the Program for converting Sakhalin's motor vehicles and agricultural equipment to natural gas. “Between 2014 and 2020 Gazprom plans to build 10 CNG filling stations and acquire 3 mobile gas filling trucks. The regional government, in its turn, is going to purchase 818 gas-powered motor vehicles, while the local companies and the citizens will convert 762 vehicles to natural gas,” he said.

The large-scale gasification of the Sakhalin Region calls for increasing gas supplies to local consumers. The potential demand of central and southern Sakhalin in natural gas is estimated at more than 1.5 billion cubic meters of gas a year.

At present, this demand is satisfied by the entitlement gas from the Sakhalin II project. However, the Russian Government Directive No. 1539-r regulating the royalties will expire in 2014.

“A new Russian Government Directive has to be issued for Sakhalin Energy to continue gas supplies to Sakhalin Region consumers as a royalty from the Sakhalin II project to be provided in kind over the entire period of the Product Sharing Agreement. This strategy agrees with the Product Sharing Agreement of Sakhalin II and seems to be the best option in relation to the existing regional gas infrastructure. Approved by the Russian Ministry of Energy, the Sakhalin Region Government and Gazprom, the strategy was presented at the meeting with Russian President held in Sakhalin in July 2013.

We will provide every assistance to the Ministry of Energy in preparing the final version of the Government Directive that will make it possible to continue the regional gasification. We ask that the Ministry of Energy accelerates the issuance of the draft Directive,” said Viktor Timoshilov summarizing his speech.

Background

Gazprom and the Sakhalin Region Government entered into the Agreement of Cooperation in September 2006 and into the Accord on Gasification in October 2012. The joint program for the regional gasification development with a validity period until 2014 was approved in 2011.