Gazprom Gives Chayanda the Go!

By Svetlana Kristallinskaya, March 28, 2013

Gazprom has made a final investment decision on developing the Chayanda gas condensate field in Yakutia and constructing a gas pipeline to the Asia-Pacific region. Experts point out the necessity of this move, but urge better risk assessment.

In late 2012, Gazprom, despite the continuing decline in gas consumption in the European market, launched Bovanenkovskoe field (which was delayed back in 2009 for this very reason, decline in gas consumption) on the Yamal Peninsula, in parallel finalizing the investment decision on the development of Chayanda gas condensate field in Yakutia, one of the largest deposits in the east of the country (the reserves category C1 + C2 reach 1.2 TCM of natural gas and 79.1 million tons of oil and condensate). Bovanenkovskoe field is focused on the European market, Chayanda – on Asian countries.

To deliver Chayanda-produced gas, Gazprom will build the 61 billion cubic meters, 3,200 kilometers long Yakutia – Khabarovsk – Vladivostok pipeline. The pipeline is scheduled for the end of 2017.

The project could optionally be linked to gas pipeline of Irkutsk gas production center – and its flagship Kovykta field (reserves 1.5 trillion cubic meters of natural gas). However, the Gazprom is considering supplying Kovykta gas to the west, too – in essence, the giant is proposing to connect Eastern Russia and Western Siberia.
Gazprom also plans to install processing facilities for natural and associated gas in Belogorsk (some 2,000 kilometers from Chayanda, in the Amur region). Full capacity of the Chayanda field is estimated at up to 25 billion cubic meters of gas and at least 1.5 million tons of crude per year. The oil rim is penciled for pilot development in 2014, natural gas deposit – for 2017.

To Launch at Any Cost

Investment decision on Chayanda should have been made way back in mid-2011, but closer to the deadline Gazprom said field development would be unprofitable without tax breaks. Instead, over the past year and a half the government put even more tax pressure for Gazprom, doubling the tax on natural resources production (NDPI) for natural gas.
Nevertheless, says Sberbank CIB analyst Valery Nesterov, Gazprom still have quite strong lobbying arm, as evidenced by allocation of the shelf zones. The company is “very confident that the government will support the East Siberian projects” with tax relief, goes on the expert. According to the expert, the state realizes that the company is uniquely qualified to prop up the region’s economy. Gazprom has already got understanding with the Ministry of Energy – the only remaining barrier is the Finance Ministry.

Flexible Pipe

Gazprom wants to install an 11-28-billion-cubic -meter (10-25-million-ton) LNG facility near Vladivostok, which is where the gas from Chayanda and Sakhalin (and, perhaps, Kovykta) will be shipped.

Pipeline shipments to Asia-Pacific is secondary concern for the giant; first, Gazprom plans to finish the LNG plant project and sign long-term LNG export contracts.
This mainly refers to the negotiations with China. There are two routes – the “Western”, which involves the construction of up