Journalists disembark from a helicopter upon arrival at the Prirazlomnoye oil platform located in the Pechora Sea on September 12. Gazprom Neft will stick to its production plans at its Prirazlomnoye oilfield in the Arctic despite being put under Western sanctions, First Deputy CEO Vadim Yakovlev said.
Reuters
Gazprom Neft, the oil arm of Russian state gas company Gazprom, may turn to alternative equipment providers to meet production targets at its Prirazlomnoye oil field in the Arctic, after Western sanctions restricted access to existing suppliers.
Speaking on Friday before Washington banned Western companies from supporting Gazprom Neft in exploration or production in deep water, Arctic offshore and shale projects, Vadim Yakovlev, first deputy CEO at Gazprom Neft, said he believed the company could stick to its long-term goals as things stood.
But aware further sanctions were on the cards over Russia’s role in the Ukraine crisis, he added: “If events go under the most negative scenario, we are working at options to buy (equipment) from alternative sources or producing it by Russian or Asian companies.”
“At the moment, we don’t think that this will affect our long-term plans,” Yakovlev told reporters on a visit to the Prirazlomnaya platform some 60km (40 miles) offshore in the Arctic’s Pechora Sea. He did not name any affected companies.
Yakovlev said the field should reach peak oil production of 5.5mn tonnes (110,000 bpd) by 2021, after which it would produce more than 4mn tonnes a year for around three years. By 2020, the company as a whole should produce 100mn tonnes of oil equivalent.
The field is Russia’s first offshore Arctic field — a key source for future hydrocarbon production growth in Russia, the world’s biggest oil producing nation. Its oil production stands at around 10.5mn barrels per day (bpd).
Gazprom Neft is already under EU sanctions barring it from raising financing in Europe and now is one of five Russian energy companies to be targeted by Washington.
Yakovlev estimated that foreign firms which he declined to name were responsible for less than half of all the work done at the platform, including drilling and maintaining equipment.
On Friday, it was weather rather than sanctions that affected operations at the platform. A tanker supposed to ship the second cargo of 70,000 tonnes of Arctic Oil or ARCO was anchored some 500 metres away to start loadings but the wind was too strong.
“The wind is so strong that tanker decided not to dock today,” Alexander Vasilyev, head of the Prirazlomnaya platform, told Reuters.
Gazprom Neft said yesterday it had started to load the second tanker, out of four planned for this year, over the weekend. It should move to northwest Europe soon.
The company did not name the buyer. Traders told Reuters earlier that France’s Total bought the first cargo which left this spring. In total, the field plans to produce 300,000 tonnes of oil this year.
The Arctic is estimated to contain 20% of the world’s undiscovered hydrocarbon resources, which along with shale oil — where Russia is believed to have the largest resources globally — should support Russia’s oil production.
Currently, Russia extracts a tiny amount of oil from offshore in the Arctic and less than 1mn tonnes a year from unconventional resources. Gazprom Neft and Surgutneftegas are pioneering shale oil work in Russia.
Last year, Gazprom Neft increased hydrocarbon production by 4.3% to 62.2 tonnes in oil equivalent. In oil equivalent, production should add around 5.5% this year and around 2.5% by oil. In 2015, growth should be higher, he said.
Gazprom Neft is exploring for shale oil on its own and via two joint ventures with Royal Dutch Shell.
“We will continue to work on these projects. In terms of technologies, there is nothing unique there — it is more know-how or skills to use traditional techniques of horizontal drilling ... for this type of formations,” Yakovlev said.
Wingas says takeover by Gazprom on course
Gazprom’s deal to take over the gas trading arm of Germany’s BASF, a leading player in Europe, will be sealed this autumn with no impact expected from sanctions against Russia, said a board member of the BASF unit Wingas.
Ludwig Moehring also reiterated that small declines in Russian gas supply to some European countries this month were within normal variations, which he said was reflected in the way gas prices had failed to rally on them.
Moehring, in charge of sales at Kassel-based importer and trader Wingas, said the Gazprom deal had already been delayed from the summer, but due to ironing out legal details.
“We expect the closing in the autumn and do not fear it will be delayed any further in the (Ukraine) crisis,” Moehring told Reuters.
The 2012 asset-swap agreement with BASF will give Gazprom access to Wingas, which last year sold 44.3bn cubic meters (bcm) across western Europe — equivalent to nearly half of Germany’s total consumption, and 14.1% more than 2012.
Once the deal, which also entails Gazprom taking ownership of 6 bcm of BASF’s gas storage capacity, is through, Wingas will be moving to new offices in Kassel next year, Moehring said.
Asked about Wingas ability to obtain credit if it was rated as a Gazprom subsidiary, he said this was “being assessed.” He added “But we are no longer a billions of euros investor because we no longer have pipeline activities to pay for.”
The swap deal entails a huge long-distance pipeline network called Gascade, owned by BASF’s oil and gas exploration unit Wintershall, staying with BASF.
Wingas would aim to widen its sales outside Germany, which currently accounts for 75% of its total, but would not dramatically change the make-up of its procurement portfolio, that is based on 50% of gas from Russia, Moehring said.
It is active in eight western European countries including Britain, where Gazprom also has representations. Europe’s gas production is declining, making greater Russian market share politically controversial but in reality highly likely.
Gazprom has been seeking direct access to lucrative European energy consumers for years rather than relying on middlemen.
Reduced natural gas deliveries out of Russia to Europe are within normal fluctuation ranges, Moehring said.
“We also saw lower volumes arrive...but that is no reason for concern and is within normal limits which we also saw in previous years when full capacity was not needed,” he said in an interview during a conference on Friday.
“Traders know this and accordingly, prices have not seriously responded, which we see as proof for our assessment,” he added.
Russia, which supplies a third of European gas, by some is seen as flexing its muscles as it is locked in a sanctions tit-for-tat with the EU over Ukraine.
Slovakia said yesterday it was getting less gas than requested and Poland said Sunday it had received less on Saturday after the two, as well as Romania and Austria, reported lower than ordered import receipts last week.
But Moehring said it was not unusual to fill stocks in Russia’s giant gas pool, and carry out maintenance before the winter season when cold temperatures make this impossible.
Helped by a warm first half of the year, European utilities have injected as much gas into storage this summer as possible in order to prepare for any potential disruption of gas flows from Russia. Supplies this summer have been lower than last year, but significantly higher than two years ago.
Expanding availability at Europe’s spot trading hubs has also allowed buying gas at around an estimated 5 to 15% discount to volumes in fixed long-term deals, traders have said.
EU-28 gas stocks on Sunday were 90.32% full, according to Gas Infrastructure Group Europe (GIE).
The British October delivery contract at 51.30 pence a therm yesterday was 5% below its levels of 54 pence in May. Winter 2014 currently costs 61.3 cents.