Production

In December 2008 Gazprom started implementing the Comprehensive Development Program for the Yamal Peninsula Onshore and Offshore Fields (Yamal megaproject): the first joint of the Bovanenkovo – Ukhta gas trunkline system was welded and the drilling of the first production well in the Bovanenkovskoye field was initiated.

The Yamal Peninsula is the Company’s strategic gas production province. It is one of the most promising oil and gas bearing areas in Western Siberia. Exploitation of Yamal’s resources is the largest energy project in the modern history of Russia, which is unparalleled in terms of complexity. By its scale and significance the project is identical to the development of fields in Western Siberia in the 1970s. It lays the foundation necessary for gas production growth in Russia. Commercial development of Yamal’s fields will enable to bring annual gas production on the Peninsula to 310-360 billion m3 by 2030.

11 gas and 15 oil, gas and condensate fields were discovered on the Yamal Peninsula and in adjacent offshore areas. The explored reserves of the largest fields in the region – Bovanenkovskoye, Kharasaveyskoye, Severo-Tambeyskoye, Kruzenshternskoye (with development licenses held by Gazprom Group) – average 7.3 trillion m3 of gas, 119.1 million t of condensate and 4.7 million t of oil.

The first step in the practical implementation of the Yamal megaproject is the development of the largest gas field on the Peninsula – Bovanenkovskoye. The explored and preliminarily estimated reserves of this field amount to 4.9 trillion m3. Projected gas production is 115 billion m3 per annum, to be increased to 140 billion m3 per annum in the long term. The Bovanenkovskoye field is planned to be brought onstream in 2012.

In 2008 construction work was underway on the top priority project facilities including the Obskaya – Bovanenkovo railroad.

Construction began on a submerged crossing across the Baidarata Bay, which is the most complex segment of the Bovanenkovo – Ukhta gas trunkline system. Pipeline laying in such harsh natural and climatic conditions is unique both in Russia and worldwide.

The oil business development is a strategic objective of Gazprom on its way towards a global energy company.

Gazprom Group’s oil production hinges on Gazprom neft. Its acquisition in October 2005 made Gazprom Group Russia’s fifth-largest business in terms of oil output. Based on the 2008 results, 32 million t of oil and 10.9 million t of gas condensate were produced.

At present, Gazprom Group’s overall liquid hydrocarbon reserves make up 2.6 billion t, which in future enables to achieve output rates commensurate with figures recorded by the leading oil companies.

In compliance with the Gazprom oil business strategy approved by the Board of Directors, Gazprom Group intends to progressively expand operations in the liquid hydrocarbon production, transportation and processing sectors, and plans to increase annual oil output to 90-100 million t by 2020. It is also projected to boost proven oil reserves by 2,200 million t.

The production plan contemplated for 2020 envisages gradually bringing onstream all OAO Gazprom neft’s explored oil fields (with account of 50% of the shares in ОАО NGK Slavneft and OAO Tomskneft), expanding the resource base by bringing onstream oil fields owned by other companies of the Group as well as acquiring new licenses.

Coalbed methane (CBM) extraction is viewed as a major area of the strategy aimed at enlarging the resource base of OAO Gazprom and will result, in essence, in the creation of a new CBM industry in Russia. In addition, commercial introduction of Russian CBM production technologies will minimize accidents at coal mines and considerably improve the environmental situation.

According to tentative estimates, potential CBM resources in Russia are commensurate with conventional natural gas reserves and amount to 50 trillion m3. The Kuzbass region, where potential methane resources reach 13 trillion m3, is nowadays considered to be the most suitable site for commercial production. The concentration of methane in individual areas of Kuzbass is comparable to the amount of natural gas in northern Tyumen Oblast. The advantages of Kuzbass by geological and upstream characteristics as well as existing gas infrastructure and consumers located at a distance of just 15-150 km predetermine the economic viability of commercial methane production in Kuzbass.

Since 2003 Gazprom has been carrying out experimental operations to approbate CBM extraction technologies. According to provisional estimates, potential annual production from the existing license block could amount to 5 billion m3 over 2010 to 2012 and to 20 billion m3 after 2020.

In 2005 OAO Gazprom established a scientific testing range for the development of CBM production technologies at the Taldinskaya area of Kuzbass, where four pilot wells are currently in trial operation.

The studies performed at the testing range are primarily targeted at converting methane resources into reserves of commercial categories at top priority areas of Kuzbass as well as laying the geological & geophysical and technical foundation for a commercial production project.

In order to push forward CBM projects Gazprom acquired 100% of the shares in OOO Geologopromyslovaya Kompaniya Kuznetsk (OOO GPK Kuznetsk) that holds licenses to prospect for, explore and produce CBM and other hydrocarbons within the bounds of the South Kuzbass group of coal fields with methane resources estimated at 6.1 trillion m3.

At present, the work is underway on the innovative Coalbed Methane project that contemplates taking a set of actions for preparing pilot gas production from top priority blocks and areas in Kuzbass.