Yakutskhosted today a joint meeting of Gazprom and the Republic of Sakha (Yakutia) Government on the occasion of shaping the Yakutia gas production center as part of the Eastern Gas Program. The meeting was held by Alexey Miller, Chairman of the Gazprom Management Committee and Yegor Borisov, President of the Republic of Sakha (Yakutia).

Taking part in the meeting were also Vitaly Markelov, Deputy Chairman of the Gazprom Management Committee, Members of the Company's Management Committee: Oleg Aksyutin – Head of the Gas Transportation, Underground Storage and Utilization Department and Vladimir Markov – Head of the Department for Relations with the Russian Federation Authorities, heads and experts from Gazprom's specialized structural units and subsidiaries, representatives from federal and regional executive authorities.

It was stressed that on October 30 Gazprom had adopted the final investment decision on pre-development of the Chayandinskoye field being of top priority for the Yakutia gas production center, construction of the Yakutia – Khabarovsk – Vladivostok gas trunkline as well as gas processing facilities in Belogorsk. A project presentation was made for the meeting participants.

The project is unprecedented by scale for Eastern Russia's gas industry, it features extremely harsh geographic conditions and calls for advanced engineering solutions. Gas production in Yakutia will evolve as a unified complex with production in the Irkutsk Region whose resources will be put into production at the next stage. A common powerful gas transmission system (GTS) will convey gas from both centers. The Yakutia – Khabarovsk – Vladivostok will comprise the first part of the system. The new GTS will be named on the basis of the results of the contest announced by Gazprom.

According to the Investment Rationale estimations, the Chayandinskoye field pre-development will include construction of more than 300 gas and 140 oil wells, four pre-treatment units, a comprehensive gas treatment unit and an oil treatment unit, three booster compressor stations, more than 1,000 kilometers of gas and oil gathering networks, power supply and transportation facilities. It is planned to start oil and gas production from the field in 2014 and 2017 accordingly. During the plateau period the field will annually produce up to 25 billion cubic meters of gas and at least 1.5 million tons of oil.

Multi-component gas of the Chayandinskoye field like other Eastern Russia's fields has a considerable content of helium. The project envisages rational use of this strategic resource. A cutting-edge membrane technology of helium separation will be used enabling to leave as much helium in the conveyed gas as possible to sale at the helium plant in Belogorsk. The rest of helium will be retained and injected back into the reservoir directly at the Chayandinskoye field.

With a view to convey natural gas produced from the Chayandinskoye field, Gazprom will build the Yakutia – Khabarovsk – Vladivostok gas trunkline with the diameter of 1,420 millimeters and the working pressure of 9.8 MPa (100 Ata). The gas pipeline throughput will be 61 billion cubic meters per year, the length – around 3,200 kilometers, of which 1,350 kilometers will be located in Yakutia. The gas pipeline route will pass, inter alia, through swampy, mountainous and seismically hazardous areas. It is planned to bring the gas pipeline onstream in late 2017.

After public hearings and consultations with the Sakha (Yakutia) Government Gazprom selected the northern option of the gas pipeline route to be placed near Lensk, Aldan, Olekminsk, Neryungri in Yakutia and further on through Skovorodino and Belogorsk. The gas pipeline will run along the existing Eastern Siberia – Pacific Ocean oil trunkline, thus allowing to optimize infrastructure and energy supply costs. Besides, Eastern Siberia – Pacific Ocean will convey the Chayanda oil.

Construction and operation of the Chayanda infrastructure and the Yakutia – Khabarovsk – Vladivostok gas pipeline envisages the cargo traffic (procurement of construction materials and equipment) of around 18 million tons in Yakutia alone. The total number of staff engaged in construction may reach 15,000 people and more than 5,000 new workplaces have to be created for operation of local facilities.

The meeting highlighted that such a large-scale project needed a more enabling investment climate as well as measures of state support both at the federal and regional levels. The prioritized attention should be paid to creating a sustained taxation and customs environment including suspension of the severance tax, introduction of income and property tax benefits, reduction or elimination of customs duties on gas equipment having no domestic analogs. Moreover, it is necessary to develop pricing mechanisms boosting a wider use of gas by consumers in Eastern Russia.

Taking into account acceleration of the Eastern Gas Program, early creation of the power network and transportation infrastructure is vitally important. To this end, Gazprom supports proposals by the Republic of Sakha (Yakutia) Government regarding the route of the future Vilyui federal motor road that will enable, inter alia, sustained cargoes delivery to the Yakutia gas production center.

“Gazprom is already engaged in production activities in Sakhalin and Kamchatka and natural gas is being supplied to consumers. In October operations started at the Yakutia gas production center and the new gas transmission system to Vladivostok. At the next stage the GTS will be connected to the Irkutsk and, subsequently, the Krasnoyarsk centers. Developing these enormous resources will be a key factor in fostering most of Eastern Siberian and the Far Eastern economic sectors to be interconnected by a powerful gas transmission system.

Our ultimate goal is to unite major gas production centers and gas trunklines in Eastern and Western Russia: from the Baltic region and the Black Sea to the Pacific Ocean,” said Alexey Miller.

Background

The state-run Development Program for an integrated gas production, transportation and supply system in Eastern Siberia and the Far East, taking into account potential gas exports to China and other Asia-Pacific countries (Eastern Gas Program) was adopted in September 2007 pursuant to the Russian Industry and Energy Ministry Order. Gazprom was appointed by the Russian Federation Government as the Program execution coordinator.

New gas production centers are emerging in Eastern Russia: Krasnoyarsk, Irkutsk, Yakutia, Sakhalin and Kamchatka.

The Chayandinskoye oil, gas and condensate field with the subsurface use license held by Gazprom, is the cornerstone for the Yakutia gas production center. The field contains 1.2 trillion cubic meters of gas reserves and 79.1 million tons of recoverable oil and condensate reserves.

Geological exploration is underway at the Chayandinskoye field, information is being updated on the geological structure, formation geometry and the degree of pay zones saturation. More than a half of gas reserves have been classified as explored.