Novatek launches phase 2 of Yurharovskoya

Russia's second biggest gas company, Novatek, has launched phase two of the Yurharovskoya gas field, near the Arctic Circle. This will increase the company’s gas production by 20%. But as Gazprom has a monopoly on expor

The second phase of development of Yurharovskoya gas field will give Novatek an additional 7 billion cubic meters of natural gas per year. That's enough to cover the annual growth of domestic gas comsuption according to Mikhail Popov, Deputy Chairman of Novatek.

“Total supplies from this field will rise to 16 billion cubic meters.  As we continue to develop this gas deposit, in 2 years, it will allow us to pump 34 billion cubic metres of gas from the field to our customers. We've already finished the construction of all the necessary infrastructure there.”

Novatek built a pipeline to connect the field with a gas transportation system owned by Gazprom. But independent producers can use the pipeline system only to transport gas for domestic customers and not for export.

The European Union is urging Russia to open up export pipelines to independent producers but so far without success. Claude Mandil, Former Executive Director of the IEA says this has implications for Russia’s use of ‘associated’ gas from oil production.

“Many of these independent producers are actually oil producers, with associated gas, and if they cannot sell their gas they have just to flare it, which means to burn it, which is really a pity for supply, because it is gas which is lost, and awful for the environment.”

The government has promised to make gas export and domestic sales equally profitable for all producers.

They plan to increase domestic gas prices to 147 dollars per 1000 cubic meters by 2011.  That's under a formula where transport cost is subtracted from export price. But experts say as gas prices for Europe have surged by 50 percent this year alone, such a small increase won’t make the domestic market any more attractive.