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12 Oct, 2010 06:50

Domestic focus to put independent producers into gas production picture

Ministers and executives from the gas industry have been outlining their plans to develop the sector over the next two decades.

The era of easy access resources is over. The closest gas – at a depth of 2 kilometres – is almost exhausted, with production falling. The richest reserves now lie more than 4 kilometres below the surface. – such as the Achemovskie fields in the Yamal region.

Yamal is the heartland of Russia’s gas industry – it accounts for more than 80% of Russia’s gas production. At least every fifth stove in Europe burns on gas produced here.
But Europe is no longer the focus of Russia’s gas producers. Gazprom chief Alexey Miller speaking in Novii Urengoy stressed that domestic market is key.

“If the level of yields from export and domestic prices are equal the power industry will be one of the most attractive consumers for Gazprom as it is a sector that pays well.”

The domestic markets accounts for 400 billion cubic meters – that’s 3 times of Gazprom yearly exports. The volumes are there – the problem is the price. Domestic prices are well below European levels, and gas producers want to catch up. That’s good news for independent producers – excluded from Gazprom’s export monopoly. Prime Minister Vladimir Putin is expecting independent gas producers to step up to the production plate.

“By 2030 independent gas producers will be responsible for up to 30% of Russian gas output.”

Independent operators are champions of new technology. Novatek, working in the Yurharovskoe field – the second after Yambur behind the polar circle – has introduced several innovations – including methanol production and new horizontal drilling techniques – providing 33 billion cubic meters of gas – or almost 10% of domestic consumption.
Giving priority to the domestic market – means not just more exploration, but more infrastructure to supply the gas – but it guarantees a bigger role for Russia’s independent producers.