OREANDA-NEWS. June 05, 2009. Gazprom Management Committee approved the work being done to implement the Development Program for an integrated gas production, transportation and supply system in Eastern Siberia and the Far East, taking into account potential gas exports to China and other Asia-Pacific countries (Eastern Gas Program).

The Company’s specialized subdivisions and subsidiaries were tasked to prepare for state legislative and executive bodies a number of proposals on pricing, taxation, customs regulation, and a legal framework for the expansion of the Unified Gas Supply System (UGSS) into Eastern Russia.

The Management Committee ordered to ensure Gazprom’s interaction with local authorities as part of the implementation of the Eastern Gas Program projects and with oil and gas companies operating in Eastern Siberia and the Far East.

Gazprom specialized subdivisions and subsidiary companies were assigned to continue developing gas market in the East of Russia and to elaborate the issues of developing the regional gas processing and chemical industries. With due regard to the visit of Russian Premier Vladimir Putin to Japan this May, Gazprom specialized subdivisions were entrusted with studying in 2009 the scenarios for creating in-situ LNG loading and/or liquefaction capacities in the Far Eastern Federal District.

The Management Committee ordered to prepare proposals on the expansion of Gazprom’s presence in Eastern Siberia and the Far East and to continue the talks with Asia-Pacific companies and credit institutions with regard to the arrangement of natural gas supplies from Russia and possible mechanisms of investment attraction for new projects in Eastern Siberia and the Far East.

In order to fulfill the decision by the Russian Government, Gazprom’s representatives in the Sakhalin Energy management were tasked to ensure the adoption of the necessary decisions by the company’s leaders

that would facilitate the delivery of gas intended for the Russian Federation to the Sakhalin – Khabarovsk – Vladivostok gas transmission system and to the Yuzhno-Sakhalinsk Combined Heat and Power Plant (CHPP-1).

Background:

The federal Development Program for an integrated gas production, transportation and supply system in Eastern Siberia and the Far East, taking into account potential gas exports to China and other Asia-Pacific countries (Eastern Gas Program) was adopted in September 2007 pursuant to the Russian Federation Industry and Energy Ministry. Gazprom was appointed by the Russian Federation Government as the Program execution coordinator.

At present, Gazprom Group holds 45 licenses for the right to use the subsurface resources in Eastern Russia: the Krasnoyarsk Krai, Irkutsk Oblast, Republic of Sakha (Yakutia), Chukotka Autonomous Okrug, and the Okhotsk and Bering Seas offshore areas. This year Gazprom is going to obtain the subsurface licenses for the Zapadno-Kamchatsky Block and three blocks in the Sakhalin III project. Gazprom is performing geological exploration in the Krasnoyarsk and Kamchatka Krais, Irkutsk Oblast and the Sakhalin Island offshore.

Among gas trunkline projects the Sakhalin – Khabarovsk – Vladivostok gas transmission system (GTS) is a top priority of the Eastern Gas Program. In pursuance of the order by the Russian Government and the decision by Gazprom’s Board of Directors adopted in September 2008, the work is currently underway to create this GTS for the purpose of developing gas supply to the Khabarovsk Krai and Sakhalin Oblast, and organizing gas supply to the Primorsky Krai starting from the third quarter of 2011.

In September 2007 the Russian Federation Government adopted the decision prescribing Gazprom to join the Gas Supply to the Kamchatka Oblast, Phase 1 – Gas Supply to Petropavlovsk-Kamchatsky project and gave specific instructions on the relevant issues within the project.

As part of the project Gazprom is pre-developing the Kshukskoye and Nizhne-Kvakchinskoye fields on the western coast of the Kamchatka Peninsula and is constructing the Sobolevo – Petropavlovsk-Kamchatsky gas trunkline projected for commissioning in 2010. The project also stipulates developing gas distribution networks in Petropavlovsk-Kamchatsky. As part of the Eastern Gas Program execution Gazprom is elaborating concept proposals aimed at creating processing capacities in Eastern Siberia and the Far East. In particular, the Company is looking at the possibility to construct the following capacities:
a gas processing plant (GPP) and a gas chemical complex (GCC) in the Krasnoyarsk Krai based on the Sobinsko-Payginskoye oil and gas condensate field;
GPP and GCC in the Irkutsk Oblast based, inter alia, on the Chikanskoye gas and condensate field;
GPP and GCC in the Republic of Sakha (Yakutia), LNG plant and GCC in the Primorsk Krai based on the Chayanda oil and gas condensate field.
By now, Gazprom has inked eleven Cooperation Agreements with Eastern Siberian and Far Eastern regions out of the fourteen and nine regions have inked Gasification Accords with the Company.

In 2005 Gazprom developed the General Scheme of Gas Supply to and Gasification of the Irkutsk Oblast, in the first half of 2009 it will be fully amended. In 2007 the General Scheme of Gas Supply to and Gasification of the Far Eastern Federal District was developed, in 2009 Gazprom plans to finally develop the General Schemes for eleven Eastern Siberian and Far Eastern regions.

The General Schemes stipulate a comprehensive approach to the gasification of the Eastern Siberian and Far Eastern regions. The Schemes also provide for a wide usage of liquefied hydrocarbon and natural gases in parallel with pipeline natural gas.

In May 2009 Russian Government adopted the decision No.645 prescribing that since 2011 regular royalty payments and profit production of the Russian Federation under the Sakhalin I and Sakhalin II production sharing agreements are to be taken in kind (natural gas) for the purpose of arranging gas supplies to the Far Eastern Federal District.