RusEnergy

04-13-2005 Moscow. (RIA Novosti economic commentator Vasily Zubkov) - Russia is planning to produce 633.7 billion cubic meters of natural gas this year. In 2004, it produced 591 billion cubic meters, with Gazprom accounting for 92.3% of the total. The rest came from "independent producers" or oil companies and organizations that specialize in natural gas production, such as Novatek and Nortgaz to name but two. The share of these market participants will no doubt grow: LUKoil, Yukos, TNK and other companies have already declared their far-reaching ambitions. LUKoil head Vagit Alekperov, for example, considers natural gas business to be the foundation for the company's stable long-term development. Many independent producers could step up their output drastically today. But since Gazprom is a transport monopoly, it alone fixes prices for natural gas purchases, which means the "independent" producers, who do not have their own transport facilities, have to sell their natural gas to Gazprom at one-fifth of the export price. How can this Gordian knot be cut to satisfy everyone? And how can the state's interests be upheld? After all its long-term energy strategy states that the non-Gazprom share of natural gas production should be raised to 20%. This is perhaps why every natural gas market player is closely monitoring a LUKoil project in the Yamal-Nenets autonomous area, as mechanisms that could help solve a great in the future may be evolving there. The company's Nakhodkinvkoye gas deposit, which was recently put on stream in the Ob estuary, should produce a total of up to 11 billion cubic meters of natural gas in 2005-2006. The deposit's gas resources total more than 250 billion cubic meters, plus about 9 million tons of oil. Taking the Bolshekhetskaya depression on the Yamal Peninsula as a whole, where LUKoil wants to develop four more fields, the aggregate reserves come in at an estimated trillion cubic meters of natural gas, 38 million tons of gas condensate, and over 70 million tons of oil. The Nakhodkinskoye deposit is only the beginning of LUKoil's natural gas projects in the region. In two years' time, when the deposit reaches design capacity, its annual output will rise to 10 billion cubic meters a year. This will be about a quarter of all the natural gas produced by LUKoil. The oil giant has already spent $400 million on developing the new field, with one-third going on the construction of a 117-kilometer pipeline, including a 22-kilometer stretch on the bottom of the Tazovskaya Bay. The new gas pipeline has linked LUKoil gas wells (out of the 31 drilled 22 have already been commissioned) with the nearest gas compressor station, Yamburgsky, which is the starting point of Gazprom's long-distance pipelines. In October 2003, long before the Nakhodkinskoye deposit was launched, Gazprom and LUKoil signed a contract on the delivery of all LNG they produce at a fixed price per 1,000 cubic meters for a period including 2007. The partners agreed that as prices grew on the domestic market they would review purchase prices. This contract is now supplemented by a general agreement on strategic partnership between the two companies for 2005-2014, which was signed two weeks ago in Moscow. Gazprom chief Alexei Miller has described the agreement as a fine example of mutually beneficial long-term cooperation between Gazprom and independent gas producers. Alekperov, for his part, pointed out that the joint use of Gazprom's and LUKoil's production and scientific capabilities, as well as their labor and financial resources, would boost Russia's economic development and strengthen both companies economically. LUKoil's official spokesman, Dmitry Dolgov, has not ruled out the possibility that if natural gas production far exceeds transportation capabilities, the gas concern and the oil company may start working together on new infrastructure projects in the region. The time may arrive soon enough. Gazprom itself is considering gas production on the Yamal Peninsula as early as 2008. The initial production level has been put at 15 billion cubic meters, rising to 45-60 billion cubic meters by 2010. Moreover, there is an idea to build a large gas liquefaction plant in Yamal, although for many the transportation of LNG across the polar seas, rather than production itself, is a frightening prospect.