Gazprom Taps Yamal Gas to Supply Europe as Siberian Output Wanes

OAO Gazprom (OGZD) started pumping natural gas on the Arctic Yamal Peninsula, a province estimated to hold enough fuel to meet global demand for five years, as the company seeks to replace waning output at aging west Siberian fields.

The Russian gas exporter began output at the Bovanenkovo deposit, the biggest on the peninsula with 4.9 trillion cubic meters in reserves. The province has 16 trillion cubic meters.

“Russia really showed today that it is unmatched in the Arctic,” Alexey Miller, chief executive officer of the state- run company, said at an opening ceremony at the field. “The Yamal project is unprecedented in the world gas industry.”

President Vladimir Putin said by video link the region may produce 340 billion to 360 billion cubic meters of gas a year by 2030. That compares with total Gazprom production of 513 billion cubic meters last year, mainly from west Siberian fields where production has begun to dwindle. By adding volume, Gazprom reduces the risk of supply shortages to Europe after failing to meet calls for higher shipments last winter during a cold snap.

Siberia’s Nadym-Purtaz area now produces about 400 billion cubic meters a year, or about 78 percent of the company’s total output. Declining production rates will lower that to about 300 billion cubic meters by 2015 and 230 billion by 2020, Vsevolod Cherepanov, head of Gazprom’s production division, said in May.

Bovanenkovo will pump 115 billion cubic meters of gas annually by 2017, rising to 140 billion cubic meters, Miller said. It will produce 46 billion cubic meters of gas next year.

Putin, speaking today at an Energy Commission meeting at his residence outside of Moscow, ordered Gazprom to adjust its export strategy as demand grows in Asia and the company faces increased competition, including from the “shale revolution.”

Growth in production of gas from shale formations, in the U.S. particularly, has pushed down global prices for the fuel.

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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