3 Apr 2020 13:45

Gazprom seeks to make own gas and unallocated gas from Yamal and Gydan "legal property" of pipeline, not LNG

MOSCOW. April 3 (Interfax) - A proposal by Vladimir Litvinenko, Rector of the St. Petersburg Mining University, and NOVATEK to form a liquefied natural gas (LNG) production cluster in the Russian Arctic and direct all gas from the fields in these territories for liquefaction has met with a sharp and comparably drastic proposal from Gazprom .

The company is proposing to legally secure all its sections and unallocated sections of the Yamal and Gydan Peninsulas for supplies to the Unified Gas Supply System (UGSS) and to appoint it the coordinator of the development of these territories, as it was decided with regard to the Far East gas program.

Gazprom's proposals were outlined by Gazprom Deputy Chairman Vitaly Markelov in a March letter to Deputy Energy Minister Pavel Sorokin.

Sections on the Yamal and Gydan Peninsulas (and the adjacent shelf) account for 40% of Gazprom's gas reserves in the Unified Gas Supply System (UGSS) zone. By 2025 the share of Yamal production on Gazprom's balance will exceed 30%, and by 2035 - 40 per cent. Their development compensates for the natural production decline in traditional gas production areas, primarily in the Nadym-Pur-Tazovskoye region, and ensures long-term production growth for Gazprom in the UGSS zone.

Markelov notes that "in order to guarantee fulfillment of its obligations on gas supplies and, in some cases, to cover the shortage of gas supplies from independent producers, Gazprom has to ensure the availability of reserve capacities, including in production. Markelov calls Gazprom a "de facto guarantor of the Russian Federation's energy security, ensuring reliability of gas supply to consumers during autumn-winter peak consumption".

At the same time, "the potential formation of an LNG cluster based on the resources of fields in the Yamal and Gydan Peninsulas may lead to a deficit of the resource portion of the projected balance of Russia's UGSS for gas supplies through the gas transport system, including coverage of peak demand, and will not make it possible to ensure Russian energy security," the letter reads.

In this regard, Markelov insists that "it is necessary to preserve priority gas supply to Russian consumers while determining the use of the resource base under consideration. It seems unreasonable to legislatively fix mineral resource sections on the territory of the Yamal and Gydan Peninsulas and the adjacent part of the Kara Sea shelf belonging to the company as a resource base for LNG production. These proposals appear to be destructive, creating significant risks for long-term stable gas supplies to Russian consumers, as well as doubtful in terms of budgetary and general economic efficiency".

For his part, Markelov suggests that "in order to protect Russian strategic interests and ensure a high level of energy security (...) a draft law/amendment to current laws should be drawn up at the federal level in terms of setting aside a number of promising fields on the Yamal and Gydan Peninsulas, including the adjacent waters of the Kara Sea (both belonging to Gazprom and those unallocated) as fields of strategic importance for Russian gas supply, that is as a resource base exclusively for gas supplies to the UGSS".

Markelov also proposes that Gazprom be entrusted with the functions of "coordinator for development of prospective fields on the Yamal and Gydan Peninsulas analogous with its functions as of coordinator of the Eastern Gas Program".