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

Gas Storage Expansion 80 Percent Below the Target

Alarming reduction of investment into gas production, transmission and storage

On October 29, 2007, the executive board of Gazprom reviewed the company's readiness for the heating season of 2007-2008.  The press-release informs about the 2007 results of works on expansion of underground gas storage facilities (UGSF). According to the document, by the start of the winter season, the maximum potential storage withdrawal will reach 608 million cubic meters per day (mmcmd), up 8 mmcmd from the same period of last year. Note that in 2006 Gazprom has increased the maximum storage withdrawal by 32 mmcmd.

In the press-release of February 5, 2007, Gazprom informed that "the Company sets out to boost the potential daily send-out of UGS facilities to 758 mln cu m by the withdrawal period 2010-2011". Apparently, the monopoly planned to increase the maximum withdrawal rate by about 40 mmcmd every year. It turns out, that the 2007 result is 80 percent below the target.

Table 1. Maximum Potential Storage Withdrawal

 Winter season Maximum daily withdrawal, mmcm
Plan Actual
568 568
 2007-2008 640 608
 2008-2009 679  
 2009-2010 719  
 2010-2011 758  

Source: OAO Gazprom.

UGSF expansion is the least capital-intensive way to increase gas deliveries. Production and transmission volumes go up because of the growth of load factor of existing wells and pipelines, respectively. Gazprom executive board's decision to expand UGSFs was very timely and highly professional. Relatively small investment into UGSFs could help to postpone the large-scale investment into new gas production by a year or two.

The serious setback in the UGSF program combined with the reduction of investment into gas production and transmission indicates that Gazprom may not have enough reserves to fulfill its contractual obligations in the period before the commissioning of the Bovanenkovo field in Yamal peninsula. Gazprom's policy of buying different assets all over the world instead of investing capitals into the core business in Russia becomes alarming. Even if Gazprom does it to warm up the European market, it may hurt the shareholders of Russian gas monopoly.

Mikhail Korchemkin, managing director

October 29, 2007

Last modified: 12/07/14                    East European Gas Analysis 2006-2014                                           Email:
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