Gazprom Announces 2020 Target
18.06.2008 (13:13) | RBC
Russian gas giant Gazprom has revised upwards its gas production forecast until 2020.Gazprom's deputy head of the strategic development department, Sergei Pankratov, said that the company planned to produce somewhere in the region of 650 billion and 670 billion cubic meters annually by 2020, while simultaneously investing approximately RUB 210 billion (approx. $8.9bn) a year in its gas production and more than RUB 350 billion (approx. $14.8bn) in the development of its gas pipeline network. Some experts are critical of Gazprom’s plans, saying it would be more logical for the company to focus on gas production, leaving the pipeline business to private producers.
In 2007 Gazprom’s gas production declined by about 1.3 percent to 548.6 billion cubic meters. The 2008 target remains unchanged, at 561 billion cubic meters, while the goal for 2010 was reduced by 5 billion cubic meters to 565 billion cubic meters.
The long-term plans have also been corrected. Initially, Gazprom had planned to produce 580-670 billion cubic meters by 2020. In April, the gas monopoly announced it would produce 620-640 billion cubic meters, but it has now made a u-turn, revising the forecast in favor of their original targets of 670 billion cubic meters. Gazprom expects its new fields to produce about 300 billion cubic meters by 2020, but the projected increase in production is smaller, at 100 billion cubic meters as the bulk of the gas from new deposits would be used to offset the declining production in the Nadym-Pur-Tazovsky region, according to Pankratov.
To achieve these targets, about 30 percent of Gazprom’s investment will go into gas production, and more than 50 percent will be invested in the development of its pipeline system. Pankratov assessed that the company’s investment program until 2020 will be between RUB 8 trillion and RUB 10 trillion (approx. $339bn to $423.7bn). “On average, this is about RUB 700 billion (approx. $29.7bn) a year. Much of that money will be invested until 2013 in Gazprom’s projects on the Yamal Peninsula, its offshore and eastern projects,” he said. The deposits that were transferred to Gazprom by the government on May 6 would be introduced into operation after 2020, Pankratov added.
Dmitry Lyutyagin, at Veles Capital, says Gazprom’s planned investment in gas production is optimal, especially given that Gazprom receives, mostly without competition, both the most promising and largest deposits, which allows it to save on infrastructure costs as it is more expensive to build infrastructure for smaller fields. It is possible that Gazprom revised its long-term production target as a result of its more sensible approach to its offshore fields, suggests Vitaly Gromadin, at Arbat Capital. The company had already announced its 670 billion cubic meters target, but it has not yet explained how it would use the gas. It seems that the 50 billion cubic meters of gas by which the previous forecast was increased, will go to the Asia Pacific region in the form of liquefied natural gas, he believes.
Mikhail Korchemkin, Director of East European Gas Analysis, says Gazprom should not invest so much in the pipeline business. The company would only be able to increase its supplies to the Single Gas Supply System by sending 30 billion cubic meters of gas from the Shtokman field to the Nord Stream project via the Murmank-Volkhov gas pipeline, Korchemkin stressed. Gazprom's other supplies to the single system will remain at the level of 2006. So, it appears that Gazprom plans the construction of a new pipeline system from Yamal in order to free the pipelines of the Nadyr-Pur-Tazovsky region for independent producers. It would be more logical to allow independent producers build their pipelines for gas supplies to the European part of Russia than to build a new pipeline system from Yamal to Ukhta.
Gazprom’s policy seems to suggest that it plans to take control over independent production, and in this case its investment will not be in vain. From the point of view of Gazprom’s shareholders, the Russian economy and Russian gas consumers, the construction of independent gas pipelines is more beneficial, Korchemkin reckons.
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