East and west – Russia marks gas export milestones

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Russia’s natural gas industry has over the past two weeks reached a series of significant milestones in its ambitions to ramp up its exports – not just to its traditional markets in Europe but also to tempting new markets in Asia Pacific.

The milestones include the start of construction of the Bulgarian section of the South Stream pipeline and first production from the Kirinskoye field offshore Sakhalin Island. Gazprom has also been promoting its proposed Vladivostok LNG project, saying it is willing to make a stake of up to 49% available to other investors. Still awaited by some observers is the conclusion of a landmark deal for pipeline exports to China, which Gazprom has insisted should be concluded before the end of this year

Construction of the Bulgarian section of South Stream began on 31st October with the welding of the first pipeline section in a ceremony held at the Rasovo compressor station.

Welding on Gazprom's South Stream gas pipeline from Russia to Bulgaria

First weld on the Bulgarian section of the South Stream pipeline (Photo courtesy of Gazprom)

The pipeline will allow the direct export of Russian gas to Bulgaria, bypassing the transit countries involved in other export routes. It runs under the Black Sea, as does the existing Blue Stream pipeline to Turkey – another project that Gazprom undertook because of frustration at the problems that can arise in dealing with transit countries.

Strict construction schedule: Following what Gazprom’s chairman Alexey Miller described as a “strict schedule”, construction is due to begin in Serbia before the year-end and then in Hungary. Consumers in Bulgaria are due to receive first gas through the pipeline in December 2015. Miller also said that Bulgarian consumers could expect cheaper gas because it will follow a direct export route – presumably because transit fees do not have to be paid.

The 900 km offshore section of the South Stream gas pipeline will run under the Black Sea from the Russkaya compressor station on the Russian coast to the Bulgarian coast. Maximum depth will be more than 2 km and the design capacity is 63 Bcm/year. The onshore section in Europe will be 1,455 km long. Construction in Bulgaria will consist of a 540 km linear section of the pipeline as well as 366 km of loop lines and three compressor stations.

Kirinskoye start-up: A week earlier, on the eastern side of Russia, Gazprom took a major step forward with its Sakhalin 3 project with a high-level ceremony to mark first gas production and transmission system testing at the subsea production facility in the Kirinskoye field. The command to launch gas production was given by Russia’s President, Vladimir Putin (pictured above). Significantly Kirinskoye is the first installation of a subsea production facility in Russia.

“For the first time in the Russian gas industry a subsea production facility was constructed to develop a field in the Russian continental shelf,” said Miller. “The experience gained by Gazprom at the Kirinskoye field will be used for developing other Russian offshore fields.”

The key element of the system, installed at a depth of 90 meters, comprises several high-pressure pipelines fixed to a base. The manifold gathers the produced gas, which is then conveyed via a subsea pipeline to an Onshore Processing Facility (OPF). After treatment, the gas is transferred via a 139 km gas pipeline to the main compressor station of the Sakhalin-Khabarovsk-Vladivostok gas transmission system – a key element of Russia’s plans to develop LNG production at Vladivostok and pipeline gas exports to China.

Fuelling the dragon: In 2009 Gazprom and CNPC signed a framework agreement on the major terms and conditions for 68 Bcm/year of pipeline gas supply via two routes: one coming into China from the west and the other from the east. The eastern route currently looks easier to realise than the western route, because the latter would require construction of a long and costly dedicated pipeline, which will only go ahead if sales agreements are signed. The eastern route will mostly use infrastructure that Gazprom is already working on constructing or which has recently been completed.

It is for this project that Gazprom and China National Petroleum Corporation (CNPC) recently signed an agreement setting out the major terms and conditions of pipeline gas supply that they described as “legally-binding”.

A crucial factor in an agreement being reached soon is that Gazprom is making substantial progress in developing the production centres and pipeline infrastructure that would be needed in eastern Russia to make exports to China via the proposed eastern route a reality. The Kirinskoye field is a key part of this.

Gazprom is also working on developing two major new production centres in Yakutia and Irkutsk. Gas from these fields will be transported eastwards by a proposed 4,000 kilometre pipeline system called the “Power of Siberia”.

Russia’s priorities for all this gas are to supply domestic consumers in the east, then to supply the 15 mtpa LNG project at Vladivostok, and thirdly to supply China. If Gazprom’s current aspirations are met, the LNG plant could be completed by 2017 and gas exported by pipeline into eastern China from 2018.

What about Japan? It is important also not to forget that Russia and Japan have long been discussing the possibility of a gas pipeline between the two countries. However, the current status of this proposal remains a matter of speculation.

by Alex Forbes