Brave new world

The Yamal Peninsula holds vast untapped oil and gas reserves and, is according to Gazprom, crucial to the fulfilment of Russia's energy strategy. O&G reports.

Once a remote arctic outpost unknown to the rest of the world, the discovery of vast gas reserves on the Yamal Peninsula means life there will never be the same again. The area has been earmarked as crucial to the fulfilment of Russia's Energy Strategy by 2030 and gas executives are now regular visitors to the area, hovering in helicopters above the encampments of the indigenous Nenet people in whose language Yamal translates as "end of the world".

Gas reserves were first discovered in the Peninsula during the Soviet era and further investigations have revealed that the area holds Russia's biggest natural gas reserves making it key to the country's plans to become one of the world's biggest exporter of LNG. According to Gazprom's website, the maximum potential gas production on Yamal is comparable to the volume of Gazprom's current gas supplies to the domestic market and exceeds two fold the volume of gas currently exported to countries outside its domestic markets. The company, which aims to produce 90 million tons of LNG by 2020, is the biggest stakeholder so far in Yamal. Around 50 percent of its resources are currently tied up on the peninsula and, so far, it has licenses to explore several of its oil fields. Speaking at a conference on the development of oil and gas reserves in Sakhalin in October, Gazprom's deputy CEO Aleksandr Medvedev reiterated the company's previously stated aim to build an LNG plant in Yamal, adding that this plant, coupled with the plants to be developed at Shtokman and in the Far East, would help Gazprom to become a key player in the world LNG market.

Grand plans

A draft programme for the development of fields on the Yamal Peninsula and in the adjacent offshore areas was developed by Gazprom in collaboration with the Yamal-Nenets Autonomous Okrug Administration in 2002. This was later changed in line with changes to Russia's energy strategy and in 2007 the programme was amended and a scientific framework developed to support the building of gas pipelines and the development of fields on the Yamal Peninsula. These are divided into three production zones; Bovanenkova, Tambey and Southern - the licenses for most of which are held by Gazprom. The Bovanenko production zone includes three fields: Bovanenkovskoye, Kharasaveyskoye and Kruzenshternskoye - and total production in the zone is set to reach up to 220 bcm of gas per year. Gazprom holds the licences for all three fields. The Tambey production zone encompasses six fields; Severo-Tambeyskoye, Zapadno-Tambeyskoye, Tasiyskoye, Malyginskoye and Yuzho-Tambeyskoye - the licences for which are held by Gazprom - and Syadorskoye. The total production from that zone is projected to reach up to 65 bcm of gas a year. There are nine fields in the Southern production zone which is set to produce up to 30 bcm of gas. The licence for the Novoportovoskoye field is held by Gazprom and the remaining fields are Nurminskoye, Malo-Yamalskoye, Rostovtsevskoye, Arkticheskoye, Sredne-Yamalskoye, Khambateyskoye, Neytinskoye and Kamennomysskoye.

Gazprom is investing heavily in improving infrastructure and transport systems on and around the peninsula in preparation for the export of gas from its fields. It is currently planning a gas transportation system to be completed before 2030, including pipelines stretching over 2,500 km in total. Work is also underway on facilities around the Bovanenkovskoye field, including industrial bases, production, the transportation infrastructure, road management and well overhaul businesses, operational services and a power plant. Creating a transport infrastructure on the peninsula is particularly crucial to the success of exploration activities there as currently cargo can only be delivered to the Yamal by sea during the summer navigation season through the Kharasevey port. According to Gazprom's website: "Large scale development of the region is impossible without a relevant build-up of aviation and railway communication". With this mind it is building the new 525 km Obskaya-Bovanenkovo railroad line, which was due for completion in late 2009. It is also constructing the Bovanenkovo airport, which should be completed by 2012. Meanwhile in October, Gazprom announced that it has commissioned the building of a bridge over the Yuribey River flood plain on the Yamal Peninsula, which is part of the Obskaya-Bovanenkovo railroad. The 2.5 mile one bridge will be the longest north of the Arctic Circle and will have an operating life of 100 years. It will act as a link between Yamal's fields and the transportation infrastructure of the northern Urals. Speaking at the announcement of the contract, Gazprom CEO Alexey Miller, said: "The year-round delivery of cargo, equipment and personnel to develop Yamal will enable us to rapidly form a new gas province on the peninsula of fundamental importance for the development of Russia's gas industry over the coming decades."

Having kick-started the construction of the infrastructure to support exploration and production from the Yamal Peninsula's gas fields, Gazprom is now keen to find foreign partners to work in the region. It is working with the Russian government to finalise tax breaks in customs and mineral extraction duties as part of talks with several foreign oil majors about developing fields at Yamal.

According to the UK's Telegraph newspaper oil majors currently in talks with Gazprom include the Spanish company Repsol as well as Shell and Total. In an interview with the newspaper, Medvedev said: "The Russian government is preparing all the necessary measures to be applied. There are many different measures including lower customs duties, taxes on mineral extraction and other conditions. It will be finalised in the near future."

Competition

But Gazprom is not the only Russian company with its sights set on the Yamal Peninsula. In October TNK-BP announced that it had approved a US$400 million investment plan for the development of three oil fields at the Yamal Peninsula. The investment will be for the initial phase of the exploration and construction of the Suzun, Tagul and Russkoe fields. In a statement on the company's website, the company announced it would be investing US$180 million alone in the Russkoe field. So far it has invested around US$100 million into the development of the fields and is operating 10 wells within it including four producing wells. It plans to construct a gas-fired power plant in the field and a road from the field to the highway by 2011. Like Gazprom it is keen to construct a transport system to support the exporting of the gas. The company emphasised that full-scale development of the field has been hampered by the lack of transportation infrastructure in the region. Sergey Biryukov head of the Russkoe project at TNK-BP said that if the problem of oil transportation from the Russkoe oil field is solved active development of the field will start in 2011 and the field be put into full operation in 2014. According to TNK-BP's predictions oil production there will reach its peak and amount to 7.5 to 10 million tons of oil a year from 2012 to 2020. It is one of the largest oil fields in Russia and oil from the field, which is characterised by its high viscosity, can be used for the production of high quality jet fuel, diesel fuel, arctic low-cold-test low-sulfur lubricants, construction bitumen, road-building bitumen and electrode development.

For oil companies facing the dire prospect of peak oil the Yamal Peninsula is one of the world's final unexplored frontiers and one that offers vast potential. But with the world's energy giants fast staking their claim on the territory, competition for places there is rapidly heating up. Gazprom sums up the importance of the area in a statement on its website: "Sustainable development of the Russian economy and welfare of the country is impossible without large scale development of abundant natural resources. Being most explored and ready for development, Yamal is located near the existing gas transportation infrastructure, has significant reserves, and favourable production opportunities. It is impossible anywhere in Russia to create such an oil and gas production complex within two decades only. This is the reason why the development of Yamal will play a pivotal role in the national gas industry development in the 21st century."