A major program is underway inside Russia – and, if it succeeds, it
will develop a unified system for the production, transportation,
and distribution of natural gas in the Russian Far East and Eastern
Siberia. One key goal is to create a new gas outlet into the Pacific
Rim.
Russian gas giant Gazprom is coordinating the huge project. Its
first stage envisions completion of the
Okha–Komsomolsk-on-Amur–Khabarovsk gas pipeline and its extension up
to Vladivostok (Primorsky Krai). The construction of the
Komsomolsk-Khabarovsk gas pipeline section will be completed by
October 1, 2006. Most heat and power generating plants in
Komsomolsk-on-Amur already successfully employ natural gas. There
are also plans for gasification of Khabarovsky, Ulchsky, Nanaisky
and Komsomolsky Districts of the Khabarovsk Krai. First, the
Khabarovsk region plans to gasify municipal enterprises that
currently use expensive diesel fuel and fuel oil; then, it will
convert apartments and other residences.
In 2002, the Russian Government made an initial decision to build
up the gas industry and initiated development of a corresponding
federal program. The first draft of the program was completed by
Gazprom and Minpromenergo (Russian Ministry of Industry and Power
Engineering) in March 2003 and served as a baseline for further
work. The document prioritized satisfaction of domestic consumers’
demand for natural gas and maintenance of a sustainable gas supply
in Russia’s eastern territories through expansion of a unified gas
supply system to the eastern part of the country; development of the
markets for natural gas taking into account competition from other
energy resources, primarily coal and fuel oil; and maintenance of a
single export channel and securing of long-term export prices.
In order to finalize the program, Minpromenergo established a
special working group consisting of representatives of
Minpromenergo, Gazprom, Ministry for Economic Development, Ministry
for Foreign Affairs, RosEnergo, Russian Academy of Sciences, and a
large number of sector-specific organizations. The working group
will pursue its operations up to mid-2006.
The working group is currently working on an accurate definition
of the market size for natural gas in eastern Russia and the
Asian-Pacific Region. Gas processing and emissions, and storage and
utilization of helium have also become the focus of the group.
Russia currently accounts for one-third of world reserves of helium
gas. Today, the United States is the primary exporter of helium, but
the country plans to decrease its supplies in the near future. In
early April 2006, Gazprom held a conference to discuss development
of complex hydrocarbon deposits in Eastern Siberia and Sakha
(Yakutiya) Republic. These deposits, especially Kovyktinskoye
condensate gas deposit in Irkutsk Oblast, contain huge reserves of
helium. Their development is envisioned by the program of “Energy
Strategy of Russia till 2020” and will make Russia one of the
largest helium producers and suppliers in the world. Conference
participants have also agreed on a task force to work out a strategy
for complex hydrocarbon deposits development. By 2005, polyethylene
and polypropylene are also expected to be in demand on the world
markets. Therefore, Russia has good prospects for strengthening its
position on the world gas and chemical products markets.
Alexander Ananenkov, the Deputy President of Gazprom, has
emphasized the helium issue during his visits to Khabarovsk.
According to Mr. Ananenkov, natural gas should not be sent to export
in its “initial” state. The gas is valuable for its so-called
accompanying components, namely methane, propane, butane, and
especially helium. Mr. Ananenkov pointed out that there should be a
clear understanding that gas is not simply fuel but is a chemical
raw material. And special attention should be focused on
organization of high-value-added production. This requires a
well-developed gas processing industry. Currently, there is no
technical capability to process gas produced in the Eastern Siberia,
as well as no sufficient storage facilities. Therefore, prior to
development of a large number of gas deposits all necessary
infrastructure needs to be created.
Gas Reserves
Gazprom estimates the overall reserves of natural gas in Eastern
Siberia and the Russian Far East (RFE) at 64 trillion cubic meters.
This is 27 percent of Russia’s total. The largest share falls on
Eastern Siberian deposits, while the Sakhalin shelf accounts for
nearly 15 trillion cub. m.
Natural Gas Reserves of the RFE (billion cub. m.)
Sakha Republic (Yakutiya)
26 Explored Deposits
2,200.0 Overall Reserves
123.3 Prospective Resources
Kamchatskaya Oblast
4 Explored Deposits
22.6 Overall Reserves
11.5 Prospective Resources
Sakhalinskaya Oblast
50 Explored Deposits
946.6 Overall Reserves
2000.2 Prospective Resources
Chukotskiy Autonomous Region
2 Explored Deposits
14.7 Overall Reserves
11.4 Prospective Resources
Total
82 Explored Deposits
3,183.9 Overall Reserves
2,146.2 Prospective Resources
In order to ensure effective development of gas resources, four
centers were identified around the largest deposits. Sakhalin center
for gas production rests upon the deposits of the shelf area of
Sakhalin – namely Sakhalin 1 and Sakhalin 2 projects and potentially
Sakhalin 3-6 projects. The Irkutsk center is based on the
Koviktinskoye deposit. The development of this deposit is associated
with the development of the nearby Dulisminskoye and Markovskoye and
a number of other deposits. Gas production in Yakutiya will
concentrate around the richest Chayandinskoye deposit. Later, the
neighboring Srednebotuobinskoye, Verkhnevilyuchanskoye and
Tas-Yuryakhskoye deposits will step in. In Krasnoyarsk Krai
production of natural gas will take place at Sobinsko-Paiginskoye
andYurubcheno-Takhomskoye deposits.
Development of the above four centers will be conducted in
several stages. Today, gas production takes place at the Sakhalin
shelf only. Implementation of the first step of the program for
gasification of the eastern territories is associated with Sakhalin
gas. It envisions the first-priority development of the Sakhalin
shelf deposits and development of the gas transportation system to
link Sakhalin, Khabarovsk, and Vladivostok. The gas pipeline
Okha–Komsomolsk-on-Amur is already functioning in the Khabarovsk
Krai. Sakhalin gas already entered four districts of the Krai. Its
primary consumers are the cities of Komsomolsk-on-Amur and
Solnechniy. The Khabarovsk Krai government was the initiator and the
primary sponsor of the pipeline construction. This year, Gazprom
stepped in to finance further construction of the pipeline up to
Khabarovsk city. This section will be put into operation in the
early fall 2006, prior to the beginning of the heating season. The
first Khabarovsk heat and power plant (HPP-1) is already prepared to
operate on gas; the HPP-2 will be renovated in the near future.
Further plans envision bringing the pipeline up to the Sea of
Japan. Construction of a gas main in Primorskiy Krai would begin in
2006. According to the gasification program of Gazprom, Vladivostok
will receive gas by 2010. The municipal authorities are currently
determining the demand for gas and selecting specific routes for
pipeline sections. The Primorsky Krai authorities plan to switch
over to gas all residences and industrial enterprises in the major
towns and settlements of the region. Furthermore, Primorsky Krai
envisions construction of gas chemical enterprises. From there, gas
may continue on to the markets of China, South Korea, and other
Pacific Rim Countries. Upon the increase of gas supply to foreign
markets, Chayandinskoye deposit (Yakutiya) will join in.
Gazprom considers the People’s Republic of China the most
promising market for gas. Most conservative estimates for the growth
rates of Chinese economy predict six percent annual production
growth, while Chinese themselves declare 11-13 percent. Russian gas
exporters intend to target the nearby northeastern provinces and the
Bokhai bay territories. South Korea is traditionally one of the
world’s largest consumers of liquefied natural gas. The country’s
economy is not developing as rapidly as that of China. Specialists
talk of 3-5 percent annual growth. However, Korea has already
negotiated a contract with Russia for the delivery of Russian gas
under the Sakhalin-2 project. In the future, export of gas to South
Korea will grow from two to seven billion cub. m. Japan also
possesses a contract for the supply of 6 billion cub. m. of gas. The
United States is also considered a prospective buyer of RFE natural
gas.
The cost of natural gas supply contracts for international
consumers are linked to that of oil on the world markets. Gazprom
proceeds from a conservative prognosis of $25-30 per barrel when
calculating approximate costs for Russia’s gas. In this case, the
cost of 1,000 cubic meters of natural gas for People’s Republic of
China will total $130, for South Korean - $160.
Yet, domestic markets remain a priority for the gas producers.
Today, Russia’s eastern territories employ coal as the primary power
resource. By 2030, Gazprom forecasts a considerable increase of the
share of natural gas and decrease of the share of coal. The real
volume of coal consumption will not fall, however, as the
gasification program does not approve of reduction of the coal
consumption levels.
The correlation between costs of natural gas, coal, and fuel oil
on the Russian markets today differs from that of Europe. Gas in
Russia is nearly two times cheaper than coal and 4-5 times cheaper
than fuel oil, while European costs are practically the same. Coal
is 1.6 times cheaper than natural gas. By 2020, the estimated annual
domestic demand for gas will total approximately 44 billion cubic
meters. Khabarovsk Krai will account for 4.7 billion cubic meters
yearly. RFE is reported to be using gas differently than Russia’s
western territories. In the Russian Far East, natural gas is used
less in fuel and power sectors. However, its share in gas chemistry
and processing surpasses country’s average figures – 37 percent
against 21 percent in Russia as a whole. This creates prerequisites
for creation of a developed gas processing industry in the east of
Russia.
The scale of the RFE gasification program is huge. Its
implementation by 2020 will require development of six large
deposits, construction of over 5.6 million kilometers of pipelines,
17 compressor stations with the total capacity of 980 MVt, a gas
processing plant, and two helium storage facilities, as well as
three underground gas storage facilities. Implementation of this
project requires dozens of millions of dollars and involvement of
extensive domestic and foreign investment.
These activities will help resolve the pressing problems
associated with gas supply to the Russian Far East industry,
agriculture, and utilities. The unique gas, oil and condensate
deposits will be explored and large-scale geological research
activities will be initiated.
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