Gazprom Neft Invites You to Yamal

Boris Zilbermints

Interview with Gazprom Neft’s Deputy General Director for Exploration and Production, Boris Zilbermints.

Moscow, May 11, 2011. Reuters.

  • Gazprom Neft is looking at joint projects with Shell Upstream and Downstream in the RF and abroad
  • Gazprom Neft wants to return to implementing the Elephant project in Libya
  • Gazprom will transfer the Novoportovskoe and Vostochno-Orenburgskoe oil fields to Gazprom Neft before the end of 2011
  • Interview — Gazprom Neft invites you to Yamal, but is dreaming of foreign countries

Gazprom’s oil division — Gazprom Neft — is striving to expand its presence in international oil and gas projects and attract western partners to use their experience of working in complicated fields in Yamal, said Boris Zilbermints, Deputy General Director for exploration and production, in an interview for Reuters.

Gazprom Neft’s ambitious plans to double the extraction of hydrocarbons in the next ten years are forcing the company to seek the support of America’s Chevron, France’s Total and the English-Dutch Royal Dutch Shell in order to make use of their experience in the exploration of complicated fields. Besides, Gazprom Neft wants to extract hydrocarbons outside Russia independently.

“It is interesting to explore something complicated together, and it is interesting to have a two-way street — we also want to work outside Russia and get some experience,” said Zilbermints.

“In the north of Yamal, with its permafrost, our standard approach to field development will not work and we will have to invent new concepts,” he believes.

Gazprom Neft would like to pool its efforts with Shell, not only in raw materials extraction but also in oil refining.

“We are considering joint projects with Shell both in the RF and in third countries: both upstream and downstream,” said Zilbermints, but he did not dwell upon the particular interests of both companies.

In March, Shell's CEO in the RF, Charles Watson, told Reuters about negotiations with Gazprom Neft on participation in downstream projects.

Zilbermints refused to comment on the company’s plans concerning shelf projects, but said that Gazprom Neft is interested in Shell’s experience of offshore extraction and liquefied natural gas (LNG) production.

“That’s why companies such as Shell and other ‘majors’ are interesting for us in those areas where we need their experience in something new, something we cannot do ourselves,” explained Gazprom Neft’s Deputy General Director.

Gazprom’s oil “subsidiary” is not losing hope of replenishing the list of its relatively few international Elephant projects in Libya, the purchase of a share in which was postponed with the start of military operations in this country.

“We still hope that when the situation in Libya becomes stable, we will return to the Elephant project… We are waiting, we had great plans for Libya,” said Zilbermints.

DEVELOPMENT IN RUSSIA

It will be easier to double the output of Gazprom Neft once the fields of SeverEnergiya, as well as Messoyakhinsky and Novoportovsky fields, are put into operation by 2013-2015; the latter, along with the Vostochno-Orenburgsky field, will finally be bought from Gazprom before the end of the current year.

Zilbermints said that the company would buy two oil fields from Gazprom at market prices.

In spring, Gazprom Neft will use an ice-breaking fleet near the Novoportovskoe field along the Northern Sea Route to study the possibility of year-round hydrocarbons supply from Cape Kamenny in the Gulf of Ob to Western Europe. By 2014, the planned output of the field will amount to 0.5 mln tons of oil equivalent a year.

In Zilbermints’ opinion, this route will make one of the company’s most complicated projects more attractive for foreign investors.

“If we prove that it is possible to use the Northern Sea Route to transport oil from Yamal's fields, the cost of assets in the eyes of foreign companies will increase considerably. And then we will tell them: ‘Guys, we have proved it, and now you see that it works. The cost of assets amounted to X, and now it is multiplied by ten’,” he commented.

By 2020, Gazprom Neft plans to extract about 35 mln tons of oil equivalent from the company’s new fields, the SeverEnergiya, Novoportovskoe, Messoyakhinskoe and Kuyumbinskoe deposits, and 10 mln more in oil equivalent will come from the company’s international projects, while extraction from the existing assets will reach about 40-45 mln tons of oil equivalent.

According to analysts, Gazprom Neft will not be able to produce 100 mln tons in oil equivalent without expanding.

Zilbermints said that Gazprom Neft plans to extract 5-10 mln tons of oil equivalent by 2020 by means of mergers and acquisitions. He did not specify the target of their interest, but said that the company would develop, in particular, in Orenburg Region.

“If I tell you the name, its price will treble at once, you understand that. We can buy good assets in any regions. But we are certainly giving priority to the regions where we have a presence and where there will be a synergy effect. With the buyout of the eastern part of the Orenburg field from Gazprom, we will look at the opportunities for development in Orenburg Region,” specified Zilbermints.

NEW HORIZONS

Gazprom Neft wants to take part in tenders for the development of deposits such as Imilorskoe, Erginskoe and Gavrikovskoe, but it is not ready to pay any price for licenses for the development of such complicated fields.

Zilbermints expressed his hope that Zapolyarye-Purpe pipeline would be put into operation in 2015, despite differences between oil companies and the pipeline monopoly Transneft on the arrangements for project financing.

“Transneft is ready to finance the pipeline by itself, and it needs guarantees of oil supply to the pipeline. The negotiations are at an advanced and constructive stage. By the time the pipeline launches at the end of 2015, we will be able to supply 2-3 mln tons of oil equivalent a year, and then we will start increasing these volumes”, he said.

Along with its SeverEnergiya partners, NOVATEK and Italian companies Eni and Enel, Gazprom Neft is planning to start gas extraction at the SeverEnergiya fields at the end of the current year.

Zilbermints said that there are no differences between the shareholders over the production plans for SeverEnergiya, but they are in constant dialog on commercial matters.