DEVELOPMENT STRATEGY
Within the framework of the tasks set by the Energy Strategy of Russia before the national gas industry Gazprom views its mission in providing maximally efficient and balanced gas supply to Russian Federation consumers as well as securing a high degree of reliability when implementing long-term contracts and intergovernmental agreements for gas exports.
Gazprom pursues the strategic objective of becoming a global energy leader, providing secure deliveries of natural gas and other fuels and raw materials to the world and domestic energy markets as well as promoting the Company value growth in the long term. The Company’s strategy hinges on the following principles:
Company Development Conception
The required extraction rate will be maintained till 2010 by bringing to full capacity the Zapolyarnoye field as well as the Aneryakhinskaya and Kharvutinskaya areas of the Yamburgskoye field, bringing onstream relatively small blocks and satellite fields located in the region of giant fields (Medvezhye, Urengoyskoye, Yamburgskoye, Zapolyarnoye). Gazprom plans to develop the Yuzhno-Russkoye field, Valanginian deposits of the Zapolyarnoye and Pestsovoye fields, Achimov deposits of the Urengoyskoye field located near existing infrastructure, which speaks in favor of the economic viability of these projects.
The period after 2010 is projected to see the development of new strategic gas production provinces in the Far East, Eastern Siberia, Ob and Taz Bays offshore, on the Yamal Peninsula and in the Arctic Seas offshore. Field developments in these regions will require a substantial amount of investment due to long distances from existing gas trunkline systems and the need to solve a number of critical tasks while constructing wells and upstream facilities, laying gas pipelines in the permafrost soil, introducing new technologies that ensure nature preservation under harsh environmental conditions.
Additionally, Gazprom strives to get involved in hydrocarbon exploration, extraction, transmission and marketing projects in third countries, as set out in its “global presence” strategy for the global oil and gas market, through participation in both bidding procedures and asset swap deals.
MAJOR PROJECTS
Gazprom’s strategic challenges are met through consecutive execution of promising projects.
Exploiting Yamal Peninsula resources
The Yamal Peninsula fields are a Gazprom’s strategic resource base capable of maintaining production rates in the long term. Yamal has seen the discovery of 26 fields with the recoverable gas, condensate and oil reserves accounting for 10.4 tcm, 228.3 mln t and 291.8 mln t, respectively. Gazprom holds licenses for the Bovanenkovskoye, Kharasaveyskoye and Novoportovskoye fields with natural gas, condensate and oil reserves of 5.8 tcm, 100 mln t and 227 mln t, respectively. The natural gas and liquid hydrocarbon extraction potential of the above fields is estimated at 178 bcm and 7-9 mln t per year, respectively.
In order to identify the most efficient technical and economic options and decide on the investment needed for the complete development of Yamal’s fields Gazprom has developed the Investment Rationale for the Yamal Peninsula located Bovanenkovskoye field development and associated transportation system.
In October 2006 the Gazprom Management Committee issued the directive to launch the investment stage of the Bovanenkovskoye field development and gas main system construction.
Setting up an integrated gas production, transmission and supply system in Eastern Siberia and the Far East
At present, the Industry and Energy Ministry of Russia is engaged together with Gazprom in updating the Program on setting up an integrated gas production, transmission and supply system in Eastern Siberia and the Far East, taking into account potential gas exports to China and other Asia Pacific countries. The consistent approach towards exploiting natural gas resources in the Russian East represents an alternative to isolated projects on natural gas export from separate fields.
Exploiting Russian Arctic shelf resources
The Russian Arctic shelf (primarily the Barents Sea) is viewed by Gazprom as a promising area for exploring new and developing existing hydrocarbon fields. Gazprom is carrying out preparatory work to launch the development of such fields as the Shtokman and Prirazlomnoye.
The Shtokman gas and condensate field project is of strategic significance for Gazprom. The field will be the resource base for Russian gas export to Europe via the Nord Stream gas pipeline currently under construction. Shtokman’s explored reserves are valued at 3.7 tcm of gas and more than 31 mln t of gas condensate. Prirazlomnoye’s recoverable reserves make up 46.4 mln t, which enables to reach an annual production level of some 6 mln t.
Exploiting hydrocarbon resources abroad
Uzbekistan
Via its Zarubezhneftegaz subsidiary Gazprom is engaged under the Production Sharing Agreement terms in the process of rehabilitating gas production at the Shakhpakhty field (some 500 mln cu m of annual production). Gazprom has started negotiating with Uzbekistan the terms of a production sharing agreement for the Ustyurt fields development project.
Kazakhstan
Russia (represented by the Gazprom/LUKOIL TsentrCaspneftegaz joint venture) and Kazakhstan are currently in the talks about the terms of the Agreement on the joint hydrocarbon development principles for the Tsentralnaya geologic structure. The parties have so far completed electric exploration, engineering and geologic survey on a site for the first exploration well and environmental and hydrometeorological studies.
Turkmenistan
Gazprom considers the opportunity of getting involved in Turkmen offshore projects in terms of ensuring the sufficiency of resources set forth in the basic contract for Turkmen gas acquisition. Gazprom’s participation in gas extraction projects on the territory of Turkmenistan will depend on the geological and geophysical survey results for the Turkmen sector of the Caspian Sea offshore.
India
Gazprom and GAIL continue joint studies in the Bengal Bay: the parties have completed offshore seismic survey, identified the location of an exploration well and are preparing for the drilling process.
Vietnam
The parties have finalized the construction of the first offshore exploration well, performed research on promising block structures and determined sites for seismic survey.
Iran
Gazprom is engaged in stages 2 and 3 of the South Pars field project executed by the consortium comprised of Total (40%), Petronas (30%) and Gazprom (30%). The Iranian side was officially named as the onshore gas processing complex operator in June 2004. The project is currently in the return-on-investment stage expected to be completed in late 2009.
Venezuela
In August 2005 Gazprom was announced as the tender winner for Stage A of the Rafael Urdaneta project and was awarded respective 30-year upstream licenses for Urumaco-1 and Urumaco-2 blocks in the Bay of Venezuela, with the first four years of operations to see the implementation of a geological exploration program including seismic survey and exploration well drilling.
North European gas pipeline (on October 4, 2006 the project was renamed as the Nord Stream project)
The Nord Stream gas pipeline is a fundamentally new route for Russian natural gas exports to Europe under the Baltic Sea, by-passing transit countries. This project will help increase the reliability of gas deliveries to the European gas market and bolster an increase in gas supply to Europe. The Nord Stream project has been included by the European Union in the list of top priority Trans-European Gas Network projects.
NTO – Torzhok gas pipeline
Starting from 1995 Gazprom has been constructing a gas pipeline from the Urengoyskoye field located in the northern Tyumen Oblast (NTO) to the town of Torzhok. The gas pipeline is intended to be a crucial element of the multiline Urengoy – Nadym – Peregrebnoye – Ukhta – Torzhok gas transmission system, will enable to boost gas supply to industrial and household consumers of Russia’s Northwestern region as well as will secure gas exports via the Yamal – Europe pipeline. The NTO – Torzhok gas pipeline is due to be brought online gradually till 2007.
Expanding the Central Asia – Center gas transmission system
In order to have needed transmission capacities for the transit of Turkmen, Uzbek and Kazakh gas Gazprom is developing and agreeing on the Investment Rationale for the Central Asia – Center gas transmission system development with all of the participants of the Turkmenistan – Russia transportation chain on the territories of Turkmenistan, Uzbekistan and Kazakhstan.
Gaining access to liquefied natural gas markets
So far, Gazprom has developed the Company’s operating strategy for LNG production and sea-borne transportation. In 2005 Gazprom supplied its first LNG cargo to the USA followed in 2006 by the Great Britain, Japan and South Korea.
Together with PetroCanada Gazprom is studying the possibility of building an LNG plant in the Leningrad Oblast to export LNG to North America.
Investments in power generation
Power generation is becoming a promising business in Russia. Being a major supplier of fuel to this sector Gazprom is therefore active in acquiring power generation assets and making pertinent investments. Investments in the power generation sector will indemnify Gazprom as an electricity consumer against considerable price hikes as well as will enable to access a significant market segment highlighted in the Company’s business diversification strategy.