Yury Vazhenin: Investments growing
June 20, 2012, the interview was taken by Sergey Pravosudov
Published in corporate Gazprom Magazine Issue 6
Yury Vazhenin, Director General of Gazprom Pererabotka answers question posed by the Gazprom Magazine.
- Mr. Vazhenin, this year marks the 5th anniversary of Gazprom Pererabotka; what has been done since then?
Despite the fact that the company is young, it embraces the enterprises with great labor history. Last year the Sosnogorsk Gas Processing Plant (GPP) celebrated its 70th anniversary. The year of 2013 marks the 30th anniversary of the Severnoye Line Pipe Operation Center. In two years the Surgut Condensate Stabilization Plant (CSP) and the Condensate Treatment Plant (CTP) will reach its 30-year milestone. To date, the aggregate age of all branches is 200 years.
During the recent five years our team proved that they can work in a consistent manner, our resource potential and talent pool are the backbone of future business development. In total, some 12 billion cubic meters of gas was produced and processed during that time. Besides, over 38 million tons of unstable gas condensate and 32 million tons of the oil, gas and condensate mixture were also processed.
In 2011 we produced 2.4 billion cubic meters of gas. In total, 11 million tons of liquid hydrocarbon feedstock was conveyed via the system of the Yamburg – Urengoy, the Zapolyarnoye – Urengoy and the Urengoy – Surgut condensate pipelines. Last year the Novy Urengoy CTP processed 7.4 million tons of feedstock, the Surgut CSP – some 7 million tons, 2 per cent more than planned.
In the Komi Republic, at the Sosnogorsk GPP, because of decreased production of gas and the oil, gas and condensate mixture from local fields, the burden on the gas and condensate processing facilities has been lessened. However, gas and liquid hydrocarbons processing plans have been 100 and 102 per cent done, accordingly.
In Western Siberia Gazprom anticipates liquid hydrocarbons production to increase by 1 million tons in 2012 (14 per cent rise versus 2011), owing to a growth of 800 thousand tons and 200 thousand tons in feedstock produced from the Zapolyarnoye and the Yamburgskoye fields, accordingly.
Last April we commissioned the Zapolyarnoye – Urengoy condensate pipeline. At present, some 1.5 million tons of gas condensate additionally produced from the Valanginian deposits of the Zapolyarnoye oil, gas and condensate field are conveyed via the said condensate pipeline. In Western Siberia Gazprom anticipates liquid hydrocarbons production to increase by 1 million tons in 2012 (14 per cent rise versus 2011), owing to a growth of 800 thousand tons and 200 thousand tons in feedstock produced from the Zapolyarnoye and the Yamburgskoye fields, accordingly. As for Sibur, its feedstock will be halved due to the company’s own natural gas liquids (NGL) offloading facilities at the Noyabrsk rack.
- What are the company’s investment plans?
They are directly linked with the industry trends. First of all, we are getting ready to considerably increase processing output and, secondly, to significantly raise environmental requirements for the product quality. The market imposes strict conditions, and in order to follow them we are implementing a number of projects aimed at upgrading gas treatment facilities and constructing the new ones.
This year capital expenditures on implementing investment projects will exceed RUB 6 billion. In 2013 the investments in construction and upgrade of industrial facilities owned by Gazprom Pererabotka are expected to reach nearly RUB 20 billion.
In 2012 capital expenditures on implementing investment projects will be over RUB 6 billion, RUB 1.5 billion of those will be channeled to design work. Capital expenditures will annually be increased as a result of the large-scale construction launch. In 2013 the investments in construction and upgrade of industrial facilities owned by Gazprom Pererabotka are expected to reach nearly RUB 20 billion.
- Is your company ready to take up for processing the increasing volumes of raw hydrocarbons owned by Gazprom in Western Siberia?
To date, the design capacity of the Surgut CSP stands at 8 million tons. We are implementing a number of investment projects that will allow increasing the feedstock throughput to the Surgut CSP and the subsequent annual processing of 12 million tons of the feedstock. The year of 2015 is the commissioning year for these facilities, according to the capital construction plan. At present, the only thing that limits our capabilities is the main pump house at the Condensate Treatment Plant. As a fact, starting from the fourth quarter of 2012, the incoming volumes of gas condensate and oil will be a little higher than we can transit to the Surgut Condensate Stabilization Plant (CSP) via the Urengoy – Surgut condensate pipeline.
However, we’ve managed to find a solution, and this February we successfully tested an anti-turbulence admixture. Testing results surpassed our most optimistic expectations – the admixture allowed to increase transmitted feedstock by 25 per cent, from the main pump house to the Condensate Treatment Plant. Now we are facing the task to move over to the production stage. We hope that after introduction of the anti-turbulence admixture we will be able to convey the feedstock volumes that were announced by Gazprom, while the withdrawal capacities at the Condensate Treatment Plant are being crept.
Improvement in quality
- And what about the quality of the output products? After all, at the end of 2011 the Russian Government made some amendments to the Motor Fuel Specifications.
Indeed, these amendments came into force, and we were fully prepared to them as we took an active part in their creation. To date, the Surgut CSP produces Class 3 automotive gasoline and Class 5 diesel fuel, the Urengoy CTP – Class 3 diesel fuel, according to the Motor Fuel Specifications.
During further production of diesel fuel we are not planning to introduce any new changes as at the CTP we do not apply catalytic processes that would allow meeting the requirements for Class 4 and above it. As for the quality of diesel fuel produced by the Surgut CSP, it is the best fuel for today.
As for the automotive gasoline production, this summer we are planning to move over to production of Class 4 automotive gasoline as classified in the Motor Fuel Specifications. Besides, following the scheduled replacement of the catalytic converter, we will carry on a pilot test to find out if it’s possible to switch to production of Class 5 automotive gasoline under the Specifications. If the results are going to be positive, also taking into account economic feasibility, starting from 2013 the Surgut CSP can start producing Class 5 automotive gasoline.
Currently, we are doing some work on design of a naphtha isomerization unit. We are expecting to launch its construction in 2013. When it becomes operational, we will be able to enhance the naphtha product profitability through cost reduction of methyl-tret-butyl-ether (MTBE) as well as to reliably produce Super Euro-98 petrol.
- Could you please tell a few words about your cooperation plans with Sibur?
At present, Sibur is actively developing polymers production. Last year the company’s management approved a project for further expansion of NGL processing in Tobolsk. As a result, the aggregate capacity of Tobolsk-Neftekhim will reach 6.6 million tons per year. Such an enterprise will require a huge amount of feedstock, but Sibur doesn’t possess such volumes of ethane and NGL. That’s why the company turned the attention to NGL owned by the Surgut CSP, as its volumes are expected to grow on an annual basis. As a result, the company and the Gazprom management set the price formula for NGL and signed the long-term contract (throughout 2021). According to the document, between 2012 and 2016 the annual supplies will be increased from 440 thousand tons to over 1 million tons of light hydrocarbons.
- And what are the prospects for the Sosnogorsk CSP? Have you managed to agree with Lukoil on associated petroleum gas (APG) supplies to your plant?
At the moment, negotiations are ongoing regarding this issue. In the end of February Gazprom and Lukoil had a joint working meeting. The parties resolved to look into the option of supplying the whole APG to the gas transmission system of Gazprom Pererabotka, with APG compression by Lukoil. It’s more likely that the project will be implemented by a joint venture set up by Gazprom and Lukoil, and the parties were tasked to elaborate this issue.
Besides, we are looking into the engineering side of an ultra-deep well construction at the Vuktyl field. According to the most optimistic forecast by our experts, if the project is successful, then the Sosnogorsk Gas Processing Plant will be provided with the feedstock for the nearest two or three decades.
- What are the plans of Gazprom Pererabotka for the Irkutsk Region?
Alongside with supplying consumers with gas, one of the major tasks of the Eastern Gas Program is to develop the gas processing and gas chemical industries in the region. These two directions are inseparably linked with each other. That’s why our company is included into the Gazprom working group that is responsible for coordination of gas supply and gasification in the Irkutsk Region and, in addition, considers creation of processing facilities and output of products with high added value.
In 2011 Gazprom acquired the subsurface use license for the Kovyktinskoye gas and condensate field (estimated gas reserves of the field stand at 1.9 trillion cubic meters, gas and condensate reserves – 110 million tons). The Kovyktinskoye field is unique because of high concentration of helium (about 0.24 per cent) in natural gas. That’s why our main task for today is to use resources responsibly. Helium is a strategic product and we can’t afford to lose it. That’s why it is necessary to perform a whole simultaneous set of work – from development of a field and creation of a gas transmission system reaching the anticipated consumer, to construction of helium separation facilities and production of high-quality gas chemical products.
The Investment Rationale for the Chayandinskoye field facilities construction, gas transmission and processing is being currently elaborated. The document stipulates the joint development of the Chayandinskoye and the Kovyktinskoye fields and outlines various options for gas, condensate, oil and helium distribution and for the GPP/GCC and other facilities locations.
- Could you please detail your plan for helium in Eastern Siberia? Have you managed to identify the technologies for its extraction, transmission and storage?
We are now considering an option for on-the-spot gas processing including helium separation and its concentration between 1.5 and 2 per cent, based on the membrane technology. These engineering solutions have been approved following the pilot tests of a membrane unit in the Markovskoye helium-bearing field that is under the Gazprom Dobycha Krasnodar management. The concentrated helium-containing stream may be subsequently injected into a conventional cryogenic plant (in this case, capital and operating expenditures are considerably lowered), and the rest that is unclaimed – conveyed to a pay zone or a worked-out field for storage purposes.
The membrane technology for helium separation, as distinguished from conventional cryogenic technologies, allows for much easier gas separation. There are no rotating components in a membrane unit and there is no need to use any chemical agents during operation. Power consumption of the unit is just determined by expenditures on compression and maintenance of the room where the unit is located.
- Mr. Vazhenin, could you please tell us about the prospects for construction of a gas treatment plant near Vladivostok?
In January 2011 Gazprom and the Japanese Agency for Natural Resources and Energy signed the Cooperation Agreement envisaging preparation of a joint feasibility study on the options for natural gas utilization near Vladivostok as well as for natural gas and gas chemicals transportation from the Vladivostok region and their sales among potential customers in Asia-Pacific countries.
The feasibility study defined economic conditions for the LNG plant construction in Vladivostok and confirmed its technical feasibility as well as the availability of a market niche for producing no less than 10 million tons of LNG per year. According to the study, 2017–2020 is the most favorable period for Gazprom to start supplying its LNG from the vicinity of Vladivostok to the Asia-Pacific market.
The Gazprom Management Committee reviewed the results and resolved to move the plant construction project over to a new implementation stage. Pursuant to the decision, in the first quarter of 2013 the Gazprom structural units were tasked to prepare a relevant Investment Rationale for the project.
- And what are the prospects for establishing an oil refinery in Sakhalin?
In 2011 the investment concept of creating an oil refinery underwent relevant examination in Gazprom. Resources of Sakhalin III were considered as a feedstock base for the plant. But because there was no reliable and long-term feedstock base for the plant providing for its operation during the first half of its lifecycle, it was later resolved to move over to the next stage of the pre-FEED studies and the Investment Rationale after the feedstock base (i.e. condensate and oil) of the Sakhalin III project itself were proven between 2015–2016. A proposal was declined to engage other hydrocarbon resources in Sakhalin (particularly, the Sakhalin II project) for the project implementation.