The German company Wintershall has braved arctic frosts and joined Gazprom to develop this gas field near the Arctic Circle. Under the assets exchange agreement signed December 17, 2007, BASF subsidiary Wintershall will get a significant part of the “blue fuel” hidden in Yamal’s underground treasury.
Gazprom Chooses to Exchange Assets.
Under the agreement, Wintershall received 25 percent minus one share in Severneftegazprom, holder of the development license for the Yuzhno-Russkoye field, and one priority share without voting rights in Severneftegazprom’s charter capital. In total, BASF got 35 percent of the economic gains of the Yuzhno-Russkoye field. In exchange, Gazprom increased its share in Wingas GmbН, a gas trading company, from 35 to 50 percent minus one share and received 49 percent in the BASF subsidiary Wintershall, which carries out production in Libya.
In dealing with European customers, Gazprom often goes the route of assets exchange. Back in July 2006, it signed a framework agreement to exchange assets with E. ON AG, another company eager to join the Yuzhno-Russkoye development project. Gazprom CEO Alexei Miller commented on current negotiations with the German company: “We received new offers from E. ON Ruhrgas, primarily concerning energy assets in Europe. The assets will be evaluated soon, and we hope that in the nearest future we’ll round off negotiations and E. ON Ruhrgas will become another partner in developing the Yuzhno-Russkoye field.”
A JV with 100-percent Gazprom ownership, Gazprom URGM Trading, will be set up to purchase gas from Severneftegazprom and sell it in an amount proportionate to BASF’s share in the project. BASF will receive one priority share in the new venture. According to Miller, “Gas marketing is Gazprom’s undivided right.” Regarding the price for German consumers, Miller says that it consists of two components: one tied to prices in the external market (Germany), and the other to internal market prices.
Overcoming Difficulties Together
The Yuzhno-Russkoye gas field is not the first joint project for the two companies. Alexei Miller mentioned another successful JV with BASF Wintershall: Achimgas Company, which produces gas from the Achim deposits in the Urengoi field. According to Miller, “Technologically, production at this field is very difficult. Today, preparations are underway for production at the first trial field. In the event of success, it could become one of the biggest Russian-German production projects, with gas production exceeding 8 bcm.”
However, at Urengoi’s field, the low permeability gas sand of the Achim deposits occurs as deep as 3.5 km in permafrost (see OGE #1, 2007). Yuzhno-Russkoye’s Cenomanian deposits lie much closer to the surface, with an average depth of less than 1 km. Unlike its multicomponent “relative,”
Yuzhno-Russkoye’s gas is remarkable for its purity: 98 percent of its content is methane. Yuzhno-Russkoye’s reserves exceed those of Urengoi almost threefold, an amount that could satisfy Germany’s need for natural gas for the next 15 years and would make it possible to substantially increase BASF produciton capacity.
Yuzhno-Russkoye Gas to Be Shipped via Nord Stream Pipeline
In 1969, a unit of the