April 21, 2006

Gazprom owns up to gas shortfall

Russian energy giant Gazprom openly conceded Thursday that it had little natural gas left and in a few years’ time Russia would not be able to meet the demands of all consumer countries.

In the view of its deputy head Alexander Ryazanov, constraints will most likely hit those paying non-market prices, i.e., Russian consumers.

Before commercial production begins on the northern Yamal Peninsula (which at best can occur in 2012-2013), the gas monopoly has no serious resources to compensate for the declining output of extensive fields that have been in operation since Soviet times. Ryazanov even said Gazprom had the unprecedented intention to pipe the resources of independent producers, such as LUKoil, TNK-BP, Novatek, and even Yukos. By 2010, these companies can boost output by 45-55 billion cubic meters in the Nadym-Purtazovsky region – the principal incubator for new fields. However, the necessary pipeline capacity will become available only in three years’ time.

What Ryazanov classifies as the last largest deposit (with an annual output of over 25-30 billion cubic meters) in the Nadym-Purtazovsky region – the Yuzhno-Russkoye field – will go into operation in 2008. The monopoly will then be left only with reserves that are difficult to develop (the Achimovsky deposits of the Urengoi and Zapolyarny fields contain wet gas with a high percentage of heavy hydrocarbons), which call for special technologies and specific outlays, as well as Yamal resources. They have been in the planning stage for years and require at least $80 billion in capital costs.

Vladimir Milov, the president of the Energy Policy Institute, said that fuel shortages would only become worse. “Gazprom’s top managers have not acknowledged gas shortages so openly before,” he told the paper, “even though experts pointed to low-running levels three years ago. Now Russia is facing huge problems: the shortages will become greater, most evidently at consumption peaks, or in winter when supplies will be cut.”

“Not only Russia, but everybody down the line, will suffer,” Milov said. “Gazprom has wasted 15 years over Yamal without investing.”

Vedomosti