OREANDA-NEWS. August 04, 2009. ITERA, a gas trader, shall alone deal with developing the Apsatski coal and gas field, the largest one in the Trans-Baikal Territory. The Company is going to spend US40 million to accomplish geologic exploration in the license area and to begin production there in 2010–2011, reported the press-centre of ITERA.

Some time ago ITERA was trying to get Magnitogorsk Smelter (MS) as a partner to develop the field, but the talks were curtailed because of the crisis. The industry analysts claim that only companies from the Asia-Pacific Region are currently able to help ITERA develop the field.

Victor Cheremukhin, Director of ITERA Mass Media Relations Department, told „Ъ“, that the Company had completed Exploration at Apsatski field. The document shall be filed to Zabaikalnedra (Trans-Baikal Subsurface Resources) and Geolekspertiza (Geological Expertise), a Federal State Unitary Enterprise, for approval and expert review in the third quarter of the current year. ITERA is not to disclose the exploration details, but Victor Cheremukhin insists that the geological exploration and commercial development would start next year. ITERA plans to invest \\$40 million of own funds in exploration and construction within two years.

Apsatski coal field was discovered in 1949. It is located in the North of the Trans-Baikal Territory 40 kilometers away from Novaya Chara railroad station of the Baikal-Amur trunk railway. The reserves of coking coal are assessed at 2.2 billion tons (this is a half of the entire reserves of coking coal in the Trans-Baikal Territory). 969 million tons out of that amount have been explored. Experts also classify the field as being a coal and gas one: according to preliminary estimates, its coal-beds contain up to 55 billion cubic meters of methane.

ITERA Oil and Gas Company, LLC, produces and sells gas. It is controlled by ITERA Holdings Ltd. of Cyprus. The Company’s revenue was Rub 40.4 billion in 2008. ITERA purchased an Apsatski license for Rub 1.32 billion in an auction in 2008.

ITERA, right after the purchase of the Apsatski field, began looking for a partner to develop the field. The Magnitogorsk Smelter could be the one: it had given its tentative agreement to join the project. The talks with the MS were curtailed, though, because of the crisis late last year. "The development of the field requires a strategic partner. Corresponding negotiations are currently under way", — the ITERA representative told the „Ъ“.

According to the Government of the Trans-Baikal Territory, the Apsatski field can be developed two ways: an open production of about 1 million tons of coal a year, and an underground production of up to 2.4 million tons of coal and construction of a coal refinery plant. The first possibility is valued at US 50 million, and the second at approximately US 140 million. According to preliminary assessment by ITERA, the development of the field, including construction of the required infrastructure and a connection railroad to Bam-Amur trunk railway, would require about US 700 million.

Nikolai Sosnovski, an analyst with Uralsib Capital, believes that only companies of China and South Korea can currently afford so big an expense. "Despite the crisis, China is increasing imports of coking coal. For Russian companies it is easier to buy coking coal at a price of Rub. 4.7 to 5.9 thousand a ton as of last week, rather than join expensive projects", — the analyst says. Eugene Ryabkov of Antanty PioGlobal adds that the announced expenses are justified only in case the demand on coking coal is high and stable. "It is possible that when it comes to a full-fledged development, the currently poor market position would improve", — Nikolai Sosnovski pointed out.