Gazprom pipelines and export capacity

Газопроводы Газпрома и экспортные мощности

Gas pipelines of West Siberia

Газопроводы Западной Сибири

Export flows of Gazprom

Экспортные потоки

Spot, Gazprom, Brent

Цены на нефть и газ

End-use price of gas

Russia and USA

Daily gas production

Суточная добыча


Political Pipeline Project of Gazprom


Gazprom inaugurates the least important pipeline project

Gazprom has commissioned an 80MW compressor station at the Sokhranovka-Oktyabrskaya gas pipeline. According to the company's fact book, the gas pipeline permits "to exclude the transit of Russian gas through Ukrainian territory while transporting it to the consumers in Rostov region, Krasnodarsky krai, and Stavropolsky krai". The statement of Mostransgaz says the bypass was built to save Gazprom up to $40 million  a year in Ukrainian transit fees. Our map shows the bypass pipeline running along the Ukrainian border to Southern Russia.

In our view, this is one of the least efficient investments of Gazprom. The gas monopoly has spent over $1 billion just to cut small transit earnings of Ukraine. Project benefits are questionable because the additional operating costs are likely to exceed the Ukrainian transit fees.

Table 1. Comparison of Two Pipeline Projects

 Specifications   Sokranovka-Oktyabrskaya   Bogorodchany-Uzhgorod
 Length, km
310 234
 Diameter, mm
1420
1420
 Capacity, bcm/year (1)
24.0-28.0
19.0
 Line pipe cost, $ million per 1 km (very moderate) 3.0 3.0
 Total cost of line pipe, $ million 930 702
 Cost of compressor station, $ million (moderate) 100 100

 Total project cost, $ million:

1030 802
 Saved transit fees, $ million per year 40 -
 Additional export revenue, $ million per year (2) - 4480

(1) Mostransgaz and Gazprom give different numbers; (2) Assuming 16 bcm/year at $280/mcm.

Gazprom has never reported problems with the Krasnodar-Serpukhov and Stavropol-Moscow pipelines that supplied Russian gas to the regions of Southern Russia via Ukraine. The pipelines were used only from April through October to deliver up to 85 million cub m of gas daily to the underground storage facilities of Stavropol and Krasnodar regions, as well as to Russian consumers. There was no flow in winter time. In addition, the new pipeline Pochinki-Izobil'noe-Stavropol PHG has reached its design capacity, so the problem of reliability of supply of Sothern Russia was out of question.

Please note that Gazprom reports the profitability of gas export operations at about 85%. From the standpoint of profit maximization, Gazprom should have invested into gas production and new transmission pipelines. For instance, a shorter and less expensive pipeline from Bogorodchany to Uzhgorod can generate additional revenue of about $4.5 billion (see Table 1 above). The newly commissioned Sokhranovka-Oktyabrskaya pipeline is a purely political project.

Mikhail Korchemkin, managing director

November 21, 2007


Last modified: 12/07/14                    East European Gas Analysis 2006-2014                                           Email: info@eegas.com
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