Strategy
The strategy of Gazprom as a global energy company envisages access to new promising markets. The demand for Russian gas in Asia-Pacific countries, primarily China, is highly potent.
Gazprom diversifies its exports by entering the Chinese market. The relevant obligations on gas supply to China will not affect the contracts that have already been concluded with other purchasers of Russian gas. Gazprom possesses sufficient gas resources and production capabilities to meet these obligations.
Chinese market
In 2010 indigenous gas production and consumption in China amounted to 94 and 106 billion cubic meters respectively. Besides, the consumption rates are growing and dramatically surpassing the extraction rates. According to the forecasts by domestic and foreign experts, in 2020 China’s gas demand may reach 300 to 400 billion cubic meters.
Commercially, it is essential for Gazprom that natural gas is pegged to petroleum product prices and supplied under long-term contracts. Among the advantages are also relative consumer proximity (China is much closer than Europe) and the absence of transit countries en route.
Special attention will be paid to environmental issues during Altai gas pipeline construction
History and current status
Gazprom and China National Petroleum Corporation (CNPC) signed the Agreement of Strategic Cooperation on October 14, 2004. The Agreement covers examination of the issues relative to the arrangement of natural gas delivery from Russia to China by Gazprom as well as exploration of opportunities for joint gas processing and gas chemical projects in eastern Russia and in third countries.
On March 21–22, 2006 Gazprom and CNPC signed the Protocol on natural gas supplies from Russia to China. The document sets forth the accords reached in relation to gas supply schedule, volumes, routes and pricing principles.
On July 7, 2006 the Coordinating Committee for the Altai project was established.
On September 21, 2006 Gazprom and the Republic of Altai signed the Cooperation Agreement aimed at arranging joint activities to expand the Unified Gas Supply System to Russia’s Far East and to implement large-scale gas projects, primarily the Altai gas pipeline construction.
On June 24, 2009 Igor Sechin, Deputy Prime Minister of the Russian Federation and Wang Qishan, Vice Premier of the People’s Republic of China signed the Memorandum of Understanding to cooperate in the natural gas sector.
On October 13, 2009 in furtherance of the accords reached earlier, Gazprom and CNPC signed the Framework Agreement on basic terms and conditions for natural gas supply from Russia to China. The document specifies the volumes, directions and startup date for gas supplies, and links the price formula with the oil basket index.
On September 27, 2010 Gazprom and CNPC signed the Extended Major Terms and Conditions of Natural Gas Supplies from Russia to China. The document sets the key commercial parameters of the forthcoming natural gas delivery to the Chinese market via the “western” route: the volumes and the timeframe for export startup, the take-or-pay level, the supplies buildup period, the guaranteed payment level. The export contract is expected to be signed in mid-2011. First supplies are planned for late 2015. Under the agreements reached the contract period will be 30 years and the supply volume upon reaching design capacity – 30 billion cubic meters a year.
By now, the specific feasibility studies of supply routes have been performed and the investment rationale has been completed for the project.
Technical features
For the supply of the said gas amounts the new Altai pipeline system is planned for construction within the existing transmission corridor from Western Siberia to Novosibirsk with follow-up extension to the Russian-Chinese border. The 2,600-kilometer gas pipeline will be constructed with the use of 1,420-millimeter pipes as well as modern and powerful compressor stations ensuring high efficiency and reliability of export supplies.
Environmental aspect
The environmental aspect will be a priority for Gazprom when constructing the Altai gas pipeline as well as other projects.
Gazprom possess a long-standing and unique experience in engineering and constructing gas transmission systems in a challenging environment with the use of the most advanced and reliable systems for environmental protection, control and monitoring.
All possible options of the pipeline placement were considered at the route planning stage. The final selection of the route was conditioned not only by the project economics, but the possible environmental impacts as well.
The Investment Rationale included such items as the Environmental Impact Assessment, Protection of Archaeological and Historic Sites in the Pipeline Construction Area with due consideration for the Altai Golden Mountains natural reservation and regulatory opportunities for carrying out business activities in specially protected natural areas.
Pursuant to the Guidelines for Assessing the Environmental Impact caused by the planned business and other activities, the public hearings were held in the Russian Federation based on the Investment Rationale. Taking part in the hearings were representatives from the Association of Indigenous Minorities of Northern Russia, Siberia, the Far East as well as from other public organizations. The hearings participants generally approved the Altai project. The Investment Rationale for the Altai project fully observed the comments and proposals made by the participants.
The Altai project will pass the corporate and state environmental evaluations. Maximal transparency will be ensured during the project development and execution with an input from research and ecological communities and mass media.
Social aspect
The Altai project will improve the reliability of gas supplies to the region, create jobs, and considerably replenish the regional and local budgets through the relevant tax allocations.
The ongoing gasification process will improve the environmental situation in Gorno-Altaisk and its suburbs, where dozens of coal-fired boiler houses are polluting the air especially in winter.
The Cooperation Agreement between Gazprom and the Altai Republic Administration stipulates Gazprom’s financial participation in regional social projects.
The Agreement provides, inter alia, for gas supplies to regional settlements, reconstruction of roads, bridges and the Gorno-Altaisk airport runway. Gazprom will train pipeline maintenance staff at local higher education institutions. The Company is going to finance other social projects as well.
Regional aspects
The future Altai gas trunkline will run through six Russian constituents: the Republic of Altai, the Altai Krai, the Novosibirsk Oblast, the Tomsk Oblast, the Yamal-Nenets Autonomous Okrug and the Khanty-Mansiysk Autonomous Okrug – Yugra.
The gas pipeline construction project will materially influence the economic development of the said areas and raise their investment appeal.
Natural gas utilization will considerably improve the living conditions in the region, the environmental situation and enable to create a number of greenfield high-efficiency production enterprises and industries, increase the competitive ability of the products.
From the social aspect, the Altai project will result in higher rates of employment among the local population including at the companies producing equipment and components for the gas industry, construction industry, etc.
The cooperation between Gazprom and Russian regions hinges on the previously signed Cooperation Agreements and Gasification Accords as well as special agreements planned for conclusion over the pipeline construction period.
These documents and the applicable legislation will regulate the compensatory, environmental and charitable actions coordinated with regional authorities.