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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
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