Supply to EU assured as Gazprom launches new field

Gazprom has launched production at the Yuzhno-Russkoye gas field. It's located in the Yamalo-Nenets Autonomous Area in Siberia. It will supply the Nord Stream gas pipeline to northern Europe.

Yuzhno-Russkoye is the first field Gazprom has launched in almost ten years.

Its proven reserves consist of more than 800 billion cubic metres of gas and its estimated reserves exceed 1 trillion cubic metres.

Map of Yuzhno-Russkoye gas field
Map of Yuzhno-Russkoye gas field

Once the production facility is operating at full capacity, which is planned by 2011, it will provide 25 billion cubic metres of natural gas per year.

The main destination of the gas is northern Europe via the Nord Stream pipeline now being constructed.

Speaking at the ceremony at Gazprom's headquarters, Dmitry Medvedev, Company Chairman, expressed hopes that the project would play a crucial role in ensuring European energy security.

“We have been working to achieve this for several years. Many people have contributed to the efforts of the two companies. We've searched for compromises, and eventually reached this outstanding economic achievement,” stated First Deputy Prime Minister, Dmitry Medvedev.

He also said an agreement for asset exchanges with German chemical giant BASF was a sign of effective Russian-German business partnership.

The German Foreign Minister was also present at the ceremony.

“A vital route is now being opened. It unites our countries. Both of us have said we want to work intensively to develop not only economic, but also cultural and scientific ties. We want our people to be closer to each other and we're ready to take that responsibility,” pledged German Foreign Minister Frank-Walter Steinmeier.

After the ceremony the German Foreign Minister met with Vladimir Putin.

The Russian President stressed the importance of launch of production at -Russkoye gas field, saying that it will make the European economy more secure.

“Oil and gas create a margin of safety for the European and, first of all, for the German economy. It's not only about the volumes which will be supplied from this field. It's about the quality of relations between the partners. The exchange of assets and the growth of trust is something our European partners demand in terms of energy development. And Russia is ready for that if interests of both sides are considered,” President Putin said.

Gazprom is the holder of the licence for developing the Yuzhno-Russkoye field. It has also agreed with German BASF subsidiary, Winthershall, to bring them into the project.

“We have a 25% voting share in Severneftegazprom, the company that owns the licence to the field. On top of that we have a 10% non-voting share, so economically we have 35% in the production of this field,” said John Feldman, a board member at BASF.

The Russian company is planning to get E.ON, another German producer, involved as well.

“It is more the political moment because the Russian government and Gazprom want to become more integrated downstream, to be able to buy assets and to gain some important understanding of their ultimate customers in Europe. Naturally enough, European countries are somehow nervous about this. Integration in both directions is good for both parties,” commented Ron Smith, Head of Research at Alfa-Bank.