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Hapless Hustle: Gazprom Seeks Consumers for Kirinskoye Gas

This is an abridged version. The full text is avaiable to subscribers to The Russian Energy weekly.

The frantic desire of Gazprom to de¬liver natural gas from the Kirinskoye field to Vladivostok by September defies logic. The Far Eastern regions of Russia do not need this gas at all and export-oriented projects are not going to become operational for quite a few years. The shape the project is in is a clear demonstration of poor managerial practices in the company that follows political orders regard¬less of economic considerations and marketing realities.

Market? What Market?

Phase I of the Sakhalin-Khabarovsk- Vladivostok gas pipeline with the annual capacity of 6 bcm was inaugurated in September 2011, but cannot handle even one third of the planned flow. There are no buyers for this gas.

Viktor Timoshilov, who is in charge of coordinating Gazprom’s eastern projects, said at a conference in Moscow last week that the company was going to collect supply requests from potential Far Eastern consum¬ers in April and May and would ‘get down to details of the balance of long-term gas consumption.’ The goal is evidently to learn whether anybody actually needs gas from the Kirinskoye project.

The new pipeline, which is projected to be ultimately able to transport 30 bcm of gas a year, delivers less than 1.5 bcm, and it is not Gazprom’s product. The monopoly is just begin¬ning to supply some gas of its own from Kirinskoye in the second half of the year. To meet this deadline, it has accelerated development operations at the field (an earlier plan envisaged production start in 2014.)

It will be an uphill task for Gazprom Dobycha Shelf, the operator of the project, to drill two producing wells this year. The drilling season in the area begins in July and so far, in April, the contractor does not have an approved drilling plan, RusEnergy has learned from sources in the com¬pany. And, in view of weak consump¬tion prospects in the Far Eastern regions of Russia, the frantic devel¬opment effort appears nonsensical.

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