In 2014, the Winter Olympics will be held in Russia. Natural gas will be delivered by the Dzhubqa-Lazarevskoye-Sochi pipeline, which is currently under construction, to the region where the Olympic Games will be held.
The pipeline is an example of the expanded infrastructure being built by Gazprom. This particular pipeline will underpin sustained gas supplies to the sports venues under construction and bring the eco-friendly fossil fuel to homes on the Black Sea coast.
In 2010, Gazprom produced 508.6 billion cubic meters (bcm) of gas (17.95 trillion cubic feet [Tcf] of gas), 11.3 million tons of gas condensate and 32 million tons of oil. By 2020, the company wants to produce between 640 and 660 bcm (22.6 to 23.3 Tcf) of gas and 100 million tons of oil equivalent. That will take additional investment.
Gazprom’s board of directors at its most recent meeting boosted the company’s investment in infrastructure. Adjustments to the 2011 investment program were mainly driven by the need to increase investments in the key projects for gas production, transmission and underground storage. Special attention was paid to the projects for establishing new gas centers in Yamal, Eastern Siberia and the Far East.
Gazprom’s strategy for gas-field development hinges on cost effectiveness achieved through building more gas production facilities along with gas transmission, treatment plants and storage facilities.
The board announced on Sept. 27 that it approved the adjusted Gazprom Investment Program, which includes the budget and cost optimization program for 2011.
The total amount of investments was increased to 1.2765 trillion rubles ($40.28 billion), which is 460.11 billion rubles ($14.4 billion) more than what was approved in November 2010.
Capital investments were increased by $14.42 billion to a total of $37.45 billion. Of this amount, $36.29 billion will be allocated for capital construction and acquisition of non-current assets.
According to the adjusted budget for 2011, revenues and gains will total $136.7 billion (4.33 trillion rubles) while liabilities, expenditures and investments will reach $151 billion (4.811 trillion rubles).
The external financing is determined at $4.7 billion. The increase in borrowings is needed to finance the current investment program and refinance the previously raised loans.
The adjusted company investment program for 2011 stipulates that larger capital investments will be needed for pre-development of the Boyanenkovo and Kirinskoye fields.
Several key transmission projects will also receive higher investments, including the Boyanenkovo-Ukhta, Ukhta-Torzhok, and Sakhalin-Khabarovsk-Vladivostok, Gryazovets-Vyborg, Pochinki-Gryazovets, and Dzhubqa-Lazarevskoye-Sochi gas transmission systems. A gas pipeline from the onshore processing facility in the Kirinskoye field to the Sakhalin main compressor station is also part of the program.
Another aspect of the increased spending deals with ensuring the operability of gas production and transmission systems during peak loads in the autumn and winter season of 2011-12 and 2012-13. Underground gas storage systems will also see increased spending.
Capital spending will be increased for the Industry-Specific Integrated Information and Management System that Gazprom operates.
Expenditures will also be higher on non-current assets resulting from the purchase of assets owned by Rusia Petroleum.
Production is also getting a boost in the new program. Several production projects remain as top-priority investments for capital construction. That includes the pre-development of the Bovanenkovo field, the Apt-Albian deposits in the Nyda area of the Medvezhye gas-and-condensate field, the Achimov deposits in the Urengoy oil, gas and condensate field and other projects.
Pre-development of the Kshukskoye, Nizhne-Kvakchikskoye and Kirinskoye fields will also receive additional funding.
Funds are also earmarked for the company’s projects stipulated by the governmentally approved program for construction of Olympic venues and development of Sochi as a mountain-climate resort.
The long-term financial investment plan for 2011 also prioritizes, among others, Gazprom’s participation in the development of the Shtokman and Prirazlomnove fields as well as construction of the Nord Stream and South Stream gas pipelines.
The company also plans to invest in power generation projects, including the Adler combined-heat-and-power plant for the Olympic venues.
Contact the author, Scott Weeden, at sweeden@hartenergy.com.
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