Project round up

RUSSIAN-GERMAN GAS LINK UNDER WAY
The CIS region continues to prosper with oil and gas exploration work still growing at a staggering rate. Work has begun on an ambitious gas project to connect Russia with German through the Baltic Sea. Investors in the €4 billion scheme have their sights set on 2010 as the year of completion for the 1200km-long pipeline. The route will run from Babayevo, Russia, to the coast town of Vyborg before burrowing its way under the Baltic Sea to Germany’s North Eastern town of Greifswald. The North European Gas Pipeline, which will bypass the traditional routes through Ukraine and Belarus, will eventually provide much-needed supplies to western European nations. It was also have a spur to deliver gas to Sweden. Germany is currently Europe’s largest consumer of Russian gas but both sides agreed that it would be best if the pipeline ran under the sea, rather than negotiating transit fees with neighbouring countries. Russia’s state-controlled Gazprom will own 51 percent of the project while Germany’s E.ON and BASF will have 24.5 percent shares each. “Today we have started establishing a cardinally new route for gas transmission,” said Alexey Miller, Chairman of Gazprom Management Committee. “Projected over a long term and aimed at meeting a the united Europe’s soaring needs in Russian gas, the North European Gas Pipeline will substantially enhance the reliability and flexibility of gas deliveries from Russia.”

The agreement between both countries over the pipeline was signed when Germany’s Gerhard Schroeder was chancellor. However, he lost the election soon after the deal was struck. Despite the setback his close ties with Russia were rewarded when he was appointed as board chairman of the gas project in December. Russian Prime Minister Mikhail Fradkov and Germany’s Economy Minister Michael Glos were on hand for a launch ceremony to mark the start of the mammoth pipeline. A section of pipe was welded together to mark the start of the mammoth project. “Welding the first joint of a gas pipeline from Russia to Germany is a symbolically meaningful event,” stated Wulf Bernotat, Chairman of the Board of Management and CEO of E.ON. “Our reliable partnership ties in the energy sector have been a connecting bridge between Russia and Germany over many decades. The North European Gas Pipeline construction under the Baltic Sea will be another crucial step towards promoting our co-operation.” Those involved in the work stress that the work will obey strict environmental rules and will not disturb the Baltic Sea ecosystem. The planned route for the pipeline has angered officials in Poland who see the decision to go direct to Germany through the Baltic Sea as a snub.

The Caspian Pipeline Consortium is pressing ahead on the US$2.6 billion dollar pipeline that runs from Tengiz oil field in Kazakhstan to the Russian Black Sea port of Novorossiysk. The 1500-km link started life in 1999 as a key East-West route for oil from the Caspian region to international markets. Once fully operational, the pipeline will be able to transport 67 million tonnes of oil a year.

Expansion work on the project will include ten additional pump stations, extra storage facilities and a third off shore mooring point. The work is expected to be complete in 2009 and once fully operational it will generate around US$2 billion a year in tariffs. The project is the first large-scale oil pipeline built in the former Soviet Union with the involvement of private investors. The pipeline pumped 22 million tonnes of oil to the world market in 2004. CPC has a complex organisational structure with three governments and ten companies representing seven countries. It has so far been a major benefit for Kazakhstan by allowing the development of major oilfields and generation of royalties and taxes.

KAZAKHS UNVEIL CHINA OIL LINK
Kazakhstan has staked its claim as a leading oil exporter with the recent opening of a new 1000km-long pipeline linking the land-locked country with western China. Work on the project began in 2004, joining Atasu in central Kazakhstan to Alashankou on the Chinese border. It is the first export pipeline from Kazakhstan that does not pass through Russia. The pipeline should be running to capacity by the summer and provide a much-needed source of energy for China’s booming economy. The long-term goal is to connect another pipeline from the Caspian region in west of the country, where the new Kashagan oilfield is being developed. Kazakh President Nursultan Nazarbayev was given the responsibility of pushing the button to start filling the pipeline with crude during a launch ceremony. Kazakhstan is among the world’s top 20 oil producers after doubling its output to a million barrels a day since the fall of the Soviet Union. The new link with China is seen as a significant step for Central Asian republic, which up until now exported oil through pipelines in Russia.

Blue Stream – the world’s deepest under-sea pipeline – has been finally officially launched. The €2.7 billion project was built to carry gas under the Black Sea from Russia to Turkey but delays meant the opening ceremony celebrations had to be put on ice. The project, undertaken by Russia, Turkey and Italy, has been dogged with price disputes technical issues and allegations of corruption. The deal for the pipeline was agreed in order to supply Turkey with around 60 percent of its gas needs. Turkish officials previously played down fears that the country would become too dependent on Russia for its energy needs. Technically, the pipeline is unique – reaching depths of more than two kilometres in an aggressive hydro-sulphuric environment. Many experts questioned the wisdom of running a gas pipeline at such depths when the agreement was signed in 1997. The link runs from the Izobilnoy gas plant in southern Russia across the Black Sea bed to the Turkish port of Samsun – the venue for the inauguration ceremony. Russia’s Vladamir Putin, who attended, suggested that a second Black Sea pipeline be constructed to carry oil and gas to Turkey. This would raise the capacity for gas transportation from 3.7 billion cubic metres a year to around 30 billion.

RUSSIAN OIL AND GAS NEWS

Russia is planning to launch oil and gas exploration around the Kuril islands – a move likely to anger the Japanese who claim the islands belong to them. Oil and gas deposits have been confirmed on the continental shelf of the four small North Pacific islands. Experts predict that the region could be holding 360 million tonnes of oil – enough to power Japan for a whole year. Work on the €750 million project would be carried out in stages with an action plan drawn up in the spring. The row between Russia and Japan over the islands stretches back to the Second World War.

Gazprom – the world’s largest gas company – is to pump €1.2 billion-worth of investment into Uzbekistan over the next eight years. Gazprom is keen to tap into the former Soviet neighbour’s vast natural gas supplies. It is thought that the deal will include exploring seven prospective gas fields on the bed of the Aral Sea, holding up to a trillion cubic metres of gas. Gazprom also plans to invest in the renovation of the old Soviet pipelines in order to turn Uzbekistan into a hub for natural gas in Central Asia. The country currently extracts 55 billion cubic metres of natural gas a year.

Russia’s Lukoil will continue to explore the Anaran oil field in western Iran, despite the looming threat of international sanctions being imposed on the Islamic republic. Several multi national companies have pulled their staff out of the region. Lukoil, which is carrying out work at the oilfield with Norway’s Norsk Hydro, recently announced that it had discovered a field capable of producing a billion barrels a day.

Russian oil giant Sibneft has acquired a 75 percent interest in TNK-Sakhalin LLC, which holds the licence for geological licence in the Lopukhovsky offshore block. The block holds an estimated 730 million barrels of oil equivalent. “The Far East is one of the most promising oil basins in Russia,” said acting Sibneft President Alexander Ryazanov. “We plan to continue geological exploration both in Chukotka and Sakhalin as part of our plan to expand Sibneft’s reserve base.”