Gazprom and Wintershall set up a joint venture for gas production in Russia
Release
A frame agreement and constituent documents on setting up a joint venture between Gazprom and Wintershall AG (Germany) were signed today in the central office of Gazprom. The signing procedure was attended by the Chairman of the Management Committee Alexey Miller, the Deputy chairman Alexander Ananenkov, the General director of Urengoygazprom Rim Suleimanov, the member of the Board of BASF AG, the Chairman of the Supervisory Board of Wintersall AG Dr. John Feldman, the Board Chairman of Wintershall AG Reinier Zwitserloot and the Board Member Bernhard Schmidt.
Located in Novy Urengoy, the new company will be primarily involved in the development of a pilot block of the Achimov deposits of the Urengoy gas and condensate field. During the entire period of the block development (43 years) over 200 bcm on natural gas will be produced and 40 mln tons of condensate. During the period of the block commercial development about 8.3 bcm of gas and 2.8 mln tons of condensate will be produced annually.
The amount of capital investments in construction of the surface facilities of the first pilot block will reach about US$ 700 mln. Taking into account the fact that the field development is carried out in the region with a well-developed production and social infrastructure, the “pilot” phase of the project will be funded by Wintershall AG in the amount of US$ 90 mln. The phase assumes detailed engineering work and pilot commercial operation of the first block. In case the phase turns out a success, commercial development of the field will be started. Gazprom’s investments will be carried out not from the corporate own means or attracted capital but from the profit generated by the project.
The joint venture will be selling 100% of gas produced to Gazprom, which will enable to ensure a united export route. The price of gas produced at the field will be determined in accordance with the price at the German border in the price in Yamal – Nenets Autonomous Area. The profit will be distributed between the partners in accordance with their respective stake in the project, i.e. 50% by 50%.
“Achimgaz joint venture is a pilot project interesting for Gazprom for two reasons. First of all, the project will allow us to make another step to commercial development of the Achimov deposits – natural resources that are significantly more difficult in development. Secondly, we consider the project as a modal of cooperation with foreign partners in projects like this particular one. Setting up Achimgaz joint venture Gazprom and Wintershall reached understanding in all key issues: a single export channel, price formula, financing forms and methods. I’m certain that all these will ensure success of the project”, said Alexey Miller, the Chairman of the Management Committee of Gazprom.
“As we have done before, we will take on a pioneering role together with our Russian partners, this time in the extraction of natural gas”, stressed Reinier Zwitserloot, the Board Chairman of Wintershall AG.
Background
Mutual consultations between the parties concerning a joint venture started in 1998. Wintershall AG owns modern technologies, equipment and experience in drilling sub-horizontal wells in lower-laying deposits in complicated geological conditions, which is especially important in development of the Achimov formations in Urengoy.
The Achimov horizon is located at the depth of 3150 – 3800 m and is characterized by much more complicated geological structure as compared with Senoman and Valanzhinsk deposits. According to the results of exploration works the productivity of the Achimov gas pools is confirmed in a vast territory of the Nadym-Pur-Taz region. Hydrocarbon recoverable reserves of the Achimov deposits of the region are concentrated at the Urengoy gas, oil and condensate field. Urengoygazprom – a 100% daughter company of Gazprom – is developing the Urengoy field.
The Achimov deposits of the Urengoy field are divided into six pilot blocks, which will be developed in a phase-by-phase pattern.
Information Directorate, OAO Gazprom