Altai Project

Strategy

The strategy of Gazprom as a global energy company stipulates access to new promising markets. The demand for Russian gas has a considerable potential in Asia-Pacific countries, foremost in China.

Gazprom diversifies its export routes through penetrating in the Chinese market. The gas supply commitments to China will have no impact on the implementation of the existing contracts with other countries consuming Russian gas. Gazprom has sufficient gas resources and production capacities to satisfy these multiple needs.

Altai project

Altai project

Chinese Market

In 2007 indigenous production of natural gas in China averaged 69 billion cubic meters, with the consumption standing roughly at the same level. At the same time, gas consumption rapidly grows and outpaces extraction paces. According to the forecasts of Russian and Chinese experts, China’s gas demand will amount to 150 and 280 billion cubic meters as early as in 2010 and 2020 respectively.

From a commercial viewpoint, it is crucially important for Gazprom that gas will be supplied at prices based on crude basket prices. The unconditional benefits are also a relative proximity of consumers (the transmission route to China is far lesser than to Europe) and the absence of transiting countries along the route.

Special emphasis will be placed on environmental issues during the Altai gas pipeline construction

Special emphasis will be placed on environmental issues during the Altai gas pipeline construction

History and Current Status

On March 21–22, 2006 Gazprom and China National Petroleum Corporation (CNPC) signed the Protocol on natural gas supplies from Russia to the People’s Republic of China (PRC). The Protocol sets out the major agreements for the gas supply timing, amounts, routes, and for the pricing formula principles.

On July 7, 2006 the Coordinating Committee for the Altai project was formed.

On September 21, 2006 Gazprom and the Republic of Altai entered into the Agreement of Cooperation aimed at arranging for mutial efforts to expand the Unified Gas Supply System to the Russian East and executing large-scale gas projects, primarily the Altai gas pipeline construction.

Recently, a purpose-oriented feasibility study on supply routes has been performed and the investment rationale has been completed. The relevant commercial talks are underway.

Technical Features

Russian natural gas will be supplied to the PRC from the Unified Gas Supply System via the two routes – the Western route, from the conventional Russia’s gas extraction provinces in Western Siberia and the Eastern route – from the Sakhalin fields.

The annual gas supply volume is planned at 68 billion cubic meters, with the priority given to the Western route intended to supply 30 billion cubic meters of gas per annum. This is explained by the proximity of Western Siberia’s fields to the existing gas infrastructure thus enabling to launch gas supplies within a shorter period.

For the first stage of gas supply from Western Siberia it is planned to create the new Altai pipeline transmission system within the existing transmission route with the subsequent extension to be laid through the mountains to the western area of the Russian-Chinese border. There it will integrate into the Chinese West-East pipeline that will convey gas to Shanghai. The gas pipeline is projected to be made up of 1,420 mm pipes, with modern and powerful compressor stations to be involved. The gas trunkline will strech about 2,800 km.

Environmental Aspect

Like other Gazprom’s projects the Altai gas pipeline construction will pay special attention to the environmental aspects. All possible gas pipeline routes will be reviewed during the route planning. The ultimate route selection will depend on the possible environmental impacts as well as on the project’s economics.

Gazprom has a long-lasting and unique experience in engineering and constructing gas transmission systems in the extreme environment applying the most advanced and reliable systems of environment protection, control and monitoring. The Blue Stream, Yamal – Europe, SRTO – Torzhok and other gas pipelines have proven to be a multi-year success. The Blue Stream gas pipeline construction was much more complicated than the Altai gas pipeline and demanded non-conventional and unparalled technical solutions, including in terms of environmental safety. The Blue Stream construction experience has demonstrated the practicability of safely laying the pipeline through special nature reserves, complex mountain terrains etc.

The Altai project will undergo not only all statutory public hearings and ecological expretise (industrial and state), but also independent environmental assessment. The project will be prepared and implemented with maximum transparency in partnership with the scientific and environmental communities and mass media.

Social Aspect

The Altai project implementation will make it possible to supply gas to the population centers along the gas pipeline route, create new jobs and significantly replenish the regional and local budgets through appropriate tax payments.

The already started gasification process will enable to improving the environmental situation in Gorno-Altaisk and its suburbs where, at present, especially during the winter periods, several dozens of coal-fired boilers are polluting the atmosphere.

The Cooperation Agreement between Gazprom and the Altai republic Administration provides for the Company’s financial participation in the regional social projects.

In particular, the Agreement contemplates gas supply to rural areas, reconstruction of roads and bridges, and the Gorno-Altaisk airport runway. Gazprom will train the local staff at higher educational establishments for further gas pipeline maintenance. Additionally, the Company is intended to finance other social projects.