Russian oil company looks to Arctic for growth

4/17/2019

Russian energy major Gazprom Neft expects the Arctic to account for more than half its oil and gas production by 2020, the company said, reflecting Moscow’s drive to develop the resource-rich region.

Russian President Vladimir Putin has promised tax incentives and other benefits to encourage companies to develop the Arctic region and the Northern Sea shipping route, which Moscow sees as a bridge between Asia and Europe for its energy exports.

Putin has said he expects cargo volumes along the route to increase tenfold to 80 million tons by 2025.

Gazprom Neft, the oil arm of gas giant Gazprom, is Russia’s fastest growing oil producer in terms of output and has plans to develop the Yamal peninsula in the Arctic.

Vadim Yakovlev, first deputy CEO of Gazprom Neft, told reporters in the town of Salekhard, the regional capital of Russia’s Yamalo-Nenets region, that the company’s output in Yamal would rise to 52 million tons by 2020 from 27 million tons five years earlier.

“The share of production in the Yamal-Nenets Autonomous Region will exceed 50 percent in 2020,” he told reporters, adding that hydrocarbon production there reached 47.5 million tons of oil equivalent in 2018.

He also said the company could attract foreign investors to develop the Achimov formation in Yamal, one of the most challenging projects in Siberia because of its low permeability and porosity.

Yamal is key for Russian oil and gas production. It accounts for more than one fifth of global natural gas reserves, according to a presentation on Tuesday by the regional governor.

For Gazprom Neft, Yamal’s key oilfield is Novoportovskoye, from which it exports its oil grade, Novy Port, all-year round mainly to Europe. The company plans to crank up oil production there to 8.5 million tons (170,000 bpd) by 2020 from around 7.4-7.5 million tons this year, Yakovlev said.

Apart from Novoportovskoye, Gazprom Neft is also working on some other projects in the region, including Messoyakha which it is jointly developing with Rosneft, as well as Yamburg, which may become its largest producing project in the region.

The company exports Novy Port from the Arctic Gates terminal. Yakovlev said the company may build another terminal to export oil from Yamburg, or connect it with a trunk oil pipeline.

Yakovlev also said full-scale production at Gazprom Neft’s Yamburg oilfield in Yamal could start in 2024-2025 and initially produce around 5-6 million tons a year.