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Gazprom Neft confirms extension of ARCO oil long-term supply agreement

Gazpromneft Trading GmbH (a subsidiary of Gazprom Neft) has agreed terms for the extension of its long-term supply contract for deliveries of ARCO oil (produced at its Prirazlomnoye field) throughout 2016. Pursuant to the contract, agreed with a major international company, Gazprom Neft supplied its fourth consignment of ARCO oil (a total 268,000 tonnes) to the international markets in the fourth quarter of 2016. The extended contract envisages the supply of eight to 12 100,000-tonne consignments of ARCO oil to the end of this year.

In line with increasing production at the field, Gazprom Neft has consistently increased export volumes from Prirazlomnoye. Throughout 2014–15 (since starting commercial development at the field) the company has supplied European consumers with 17 consignments of ARCO oil, amounting to 1.1 million tonnes in total.

The Kirill Lavrov and the Mikhail Ulyanov are both double-hulled ice-class (Arc6) oil tankers, able to guarantee the safe delivery of crude produced at the Prirazlomnoye field in the Arctic Sea. Both were built at the Admiralty Shipyards, St Petersburg, specifically to ensure the year-round transportation of oil produced at the platform under Arctic conditions.

Vitaly Vyatkin, General Director of Gazprom Neft Trading GmbH, commented: “This long-term supply agreement testifies to the current demand for Russian offshore oil, and buyers’ increasing confidence in this new blend, in the face of increasing competition between producers. Our organisation keeps a close eye on trends in the ever-changing international oil markets, and develops optimum solutions in response to these.”

Notes for editors

The Prirazlomnoye oilfield is located in the Pechora Sea, 60 kilometres from the shore. Recoverable reserves are in the order of 70 million tonnes. The Prirazlomnoye field is the first — and, thus far, the only — field on the Russian Arctic Shelf at which oil production is being undertaken, and the only project in the world in which Arctic production is being undertaken from a stationary platform (rig).

ARCO oil is distinguished by its high density (roughly 24 API) and sulphur content (c. 2.3 percent), as well as its low paraffin content. Relatively heavy compared to typical Russian export oil, ARCO is well suited for deep oil processing at refineries in north—western Europe. Unique chemicals used in road construction, tyre production, and in the aerospace and pharmaceutical industries can be produced from this oil.

Production — under pilot testing — commenced in December 2013, with the new ARCO oil being launched on the international markets in April 2014. More than 800,000 tonnes of oil were produced at the field in 2015. Total volumes shipped from the Prirazlomnoye field in 2015 reached more than 1.1 million tonnes.

Field development has required the construction of a unique ice-resistant platform, designed and constructed in Russia and intended for use in the most extreme climatic conditions, as well as being able to withstand maximum ice-loads. The platform is anchored to the seabed, and the safety standards thereon far exceed any requirements likely to arise, in real terms.

With the platform walls some three metres thick, the drilling of wells within this will ensure full isolation from the surrounding environment. A “zero emissions” system has been integrated into the platform to prevent the discharge of any production or drilling waste into the sea: these will, instead, be redirected to a special absorption well or, where necessary, into containers to be transported onshore for recycling.

The sale and distribution of ARCO oil on the international markets is being handled by Gazpromneft Trading GmbH.

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