Processing

Gazprom is taking efforts to advance hydrocarbon feedstock processing, enhance the quality and expand the range of products.

The project for low-density polyethylene production at the Novy Urengoy Gas Chemical Complex is one of Gazprom’s most promising ventures so far. The gases received as by-products at the Urengoy Condensate Treatment Plant will serve as the resource base for the said project. Once completed, the project is to yield 400 thousand tons of polyethylene per annum.

A sulfur granulation unit along with a facility for sulfur storage and loading on motor and railroad transport commissioned at the Astrakhan GPP in 2009 increased its granulated sulfur production capacity by 2 million tons per annum. Construction of the facilities required for quality preparation of feedstock for catalytic processes at the Astrakhan GPP will be completed in 2010. The Surgut Condensate Stabilization Plant started designing a gasoline isomerization unit in 2010 to improve the quality of its motor gasoline, while construction of the respective capacities at the Astrakhan GPP is to commence in 2011. The Orenburg Helium Plant is going to upgrade its NGL fractionation unit to ensure that its products meet the applicable European standards.

Oil refining

The Omsk Refinery (installed capacity – 19.5 million tons per annum) is the key refining company of Gazprom neft . Moreover, Gazprom neft controls the Moscow Refinery (installed capacity – 12.15 million tons per annum) and holds a 50 per cent stake in NGK Slavneft, the owner of Slavneft-Yaroslavnefteorgsintez (installed capacity – 15.2 million tons). Thus, the company has access to the refining capacities of the said companies proportionately to the stakes held.

Main types of derivatives produced by Gazprom Group (tolling not included)

	Year ended December 31
	2005	2006	2007	2008	2009
Stable gas condensate and oil, thousand tons	3,728.7	3,792.8	3,653.2	3,413.8	3,408.2
Dry gas, billion cubic meters	37.5	38.1	35.8	30.9	24.2
LPG, thousand tons	4,880.7	5,325.1	5,537.6	4,104.1	2,876.7
Motor gasoline, thousand tons	3,125.7	7,218.8	7,518.7	7,606.2	8,658.8
Technical gasoline, thousand tons	236.0	1,755.0	1,735.0	1,914.2	2,132.8
Diesel fuel, thousand tons	2,954.8	9,056.9	9,510.7	10,406.6	11,249.1
Aviation fuel, thousand tons	327.9	1,790.2	1,944.2	1,967.3	2,285.7
Fuel oil, thousand tons	1,077.8	4,886.5	5,653.9	6,138.5	6,384.1
Lubricants, thousand tons	53.0	327.0	346.4	328.3	368.5
Sulfur, thousand tons	5,370.3	5,353.5	5,432.3	5,385.9	4,405.4
Helium, thousand cubic meters	1,636.4	3,838.1	4,874.0	5,037.9	4,892.6
Odorant, thousand tons	3.1	3.0	2.8	3.0	3.0
NGL, thousand tons	3,006.6	3,896.7	2,648.9	1,488.5	454.0
Ethane, thousand tons	108.1	223.2	238.4	327.2	362.1
Carbon black, thousand tons	33.6	34.5	35.4	30.4	21.1
Methanol, thousand tons	614.0	657.1	-	-	419.0
Pentane-hexane fraction, thousand tons	75.1	92.6	102.6	111.0	35.2

As a result of the asset acquisition deals of 2009, Gazprom neft gained control of the refining assets (aggregate annual capacity – 7.3 million tons of oil) owned by NIS in the towns of Pancevo and Novi Sad.

In 2009 top priority in the Russia’s oil refining sector was given to the program for improving the motor fuel quality, the oil refining level and the operating efficiency. As part of the program, Gazprom neft started modernization programs at its plants.

In 2009 the Omsk Refinery was upgraded with a diesel hydrotreating unit capable of producing fuels with lower sulfur content as well as a unit producing high-quality feedstock (more accurate fractionation by different boiling points) for the isomerization unit being built.

It is also planned to construct a modern Omsk Refinery-based lubricants blending complex that will shift the oil production focus to premium products for passenger and commercial vehicles. Moreover, a paving bitumen plant with the capacity of 100 thousand tons is to be built in the Southern Federal Okrug.

In 2009 Slavneft-Yaroslavnefteorgsintez commissioned a hydrogen production unit as part of the modernization program. The unit is designed for offsetting the lack of hydrogen at the plant and enhancing the conversion of light petroleum products at the operational hydrocracking unit. In addition, the company reconstructed a diesel hydrotreating unit capable of producing fuels with low sulfur content. Further modernization plans envisage construction and commissioning of units for light naphtha isomerization, diesel hydrotreating and catalytic reforming of cat-cracked gasoline.

As part of modernization, the Moscow Refinery will construct units for light naphtha isomerization, catalytic reforming of cat-cracked gasoline and reconstruct a diesel hydrotreating unit.

The Group is also making investments in its refining assets located abroad – the NIS plants have almost completed planning and designing of a comprehensive treatment unit to increase light petroleum products output by 4 per cent (from 67 to 71 per cent) and to produce Euro 5 fuels.

The oil business development strategy envisages an increase in the annual volumes refined by Gazprom neft to 70 million tons by 2020 through building the company’s refining capacities in Russia and abroad up to 40 and 25–30 million tons respectively.

Associated petroleum gas (APG) utilization

In order to improve the efficiency of natural gas utilization, minimize environmental and taxation risks and to benefit from extra volumes of APG and its derivatives sold, Gazprom Group has been tackling the APG utilization challenge since 2008.

The efficient ways of APG utilization at Gazprom Group’s fields are primarily being developed along the following lines:

• increasing the share of APG produced at oil, gas and condensate fields to be processed jointly with natural gas by means of building extra compressor capacities;
• creating power generating units to produce electricity both for technological needs and for delivery into the unified energy supply system;
• constructing new gas processing plants and subsequent supply of final products to the existing and projected petrochemical capacities for advanced processing in order to receive high value-added products;
• injecting excessive APG volumes into the pay zone to boost oil recovery;
• building gas chemical capacities for APG processing into liquid hydrocarbons in the regions devoid of gas transmission infrastructure that is foremost applicable to Eastern Siberian fields.

As part of the program for higher APG utilization level, the first train of the Yuzhno-Priobskaya Gas-Turbine Power Station was commissioned in late 2009 at the Priobskoye field of Gazprom neft for the company’s technological needs. The first train capacity of 48 MW is more than twice as much as the amount of energy demanded for the development operations. The Priobskoye field development requires the second train scheduled for completion in late 2010. The second train will increase the power generating capacity to 96 MW and fully meet the field’s demand for electricity. The project for APG transmission and processing by the Yuzhno-Balyksky GPP is underway at the same field. The project is executed in partnership with Sibur Holding.

Simultaneously with the APG utilization program, Gazprom neft is delivering a joint project under the Kyoto Protocol together with its Japanese partners Mitsubishi Corporation and JX Nippon Oil & Energy Corporation at the Yety-Purovskoye field. Application of the Kyoto Protocol mechanisms makes it possible to improve the cost-efficiency of APG utilization projects. Through reductions in APG flaring and atmospheric emissions of CO2 the company seizes the opportunity to sell the so-called emission reduction units. This enables to raise extra funds for the project and make it more efficient. At present, Gazprom neft is going to initiate some more projects under the Kyoto Protocol.

Liquefied natural gas (LNG)

Liquefied natural gas production is among Gazprom’s most promising businesses. Through LNG projects the Company will diversify its activities and expand the spectrum of final products. The key benefit of LNG is its non-conventional (primarily seaborne) transportation as opposed to pipeline gas transmission.

Gazprom is gradually developing this line of business. Since 2005 Gazprom has executed one-off LNG spot deals using swap transactions (LNG – pipeline gas). Further on the Company is planning to ramp up spot trade and develop mid-term gas swap transactions (pipeline gas – European LNG).

Early entrance into the LNG market is ensured by taking the opportunities of entering the existing LNG projects. In 2007 Gazprom joined the Sakhalin II project. The next stage of the strategy implementation envisages that the Company will establish its own LNG production in Russia and other countries and arrange its own LNG marketing. It is stipulated that the Shtokman field will be a resource base for LNG production in addition to gas delivery into the Nord Stream gas pipeline. Asia-Pacific, the USA and Europe will become the major LNG sales markets

Gas-to-Liquids (GTL) fuel

GTL fuel is a motor fuel produced from gas rather than oil.

Natural gas processing into GTL fuel has long been an area of special interest for the world’s largest petroleum and petrochemical companies. Studies have shown that GTL fuel utilization instead of conventional diesel fuel enables to cut down emissions of hazardous and greenhouse gases during the bus fleet operation.

A range of new approaches to the GTL technology application has lately emerged, and this is a particularly urgent matter for the countries with abundant gas reserves located at large distances from consumers in the absence of transportation infrastructure. Large-scale application of the GTL technology makes it possible to extract huge gas resources previously considered non-feasible and convert them into highly marketable products as well as to supply them to consumers.The primary factors pushing up the volume of Gazprom Neft oil refining and derivatives production are more efficient oil refining techniques versus its export, as well as increased demand for petroleum derivatives.