Gazprom Seeks Greater Control Over Russia's Natural Gas Output

Strategic Insights -

Gazprom, Russia's gas giant, is positioning itself for a greater role in the country's Far East by proposing to buy all natural gas output from the Sakhalin-1 consortium. This move is part of its strategy to gain control over gas exports and create its own reserves base on Sakhalin Island. The plan involves the creation of a gas transportation system from Sakhalin to Vladivostok, with possible extensions to China and South Korea. Gazprom has also offered to buy gas from the consortium at an export-linked price, significantly lower than international levels.

Key Takeaways:

  • Gazprom is seeking to buy all natural gas output from the Sakhalin-1 consortium, with an export-linked price reportedly significantly lower than international levels.
  • The move is part of Gazprom's strategy to gain control over gas exports and create its own reserves base on Sakhalin Island.
  • The plan involves the creation of a gas transportation system from Sakhalin to Vladivostok, with possible extensions to China and South Korea.
  • Exxon Mobil, which leads the Sakhalin-1 consortium, holds 30% stake in the project alongside other partners, including India's Oil and Natural Gas Corp., Russia's state-run Rosneft, and Japan's Sodeco.
  • The Sakhalin-1 consortium has agreed to supply 2 Bcm-3 Bcm/yr of associated gas to the Khabarovsk region, with a total gas reserve of 485 Bcm.
  • Gazprom and Royal Dutch Shell have recently formed a working group to examine Gazprom's planned entry into the Sakhalin-2 project, with Shell holding a 50% interest in the Zapolyarnoye gas field in West Siberia.

Statistics:

  • Gazprom's proposed buyout price is significantly lower than international gas prices ($4 times lower).
  • Exxon Mobil plans to invest $1.6 billion in the Sakhalin-1 project this year, focusing on oil production.
  • The Sakhalin-1 consortium aims to reach 250,000 b/d oil production by the end of 2023, with a current production of 41,000 b/d in February.
  • The Sakhalin-1 contract area holds 485 Bcm of gas reserves.
  • The consortium aims to sell pipeline gas to China, South Korea, and possibly Japan, with little success so far in finding buyers.

Sources:

  • NC Apr.6, p4: "Exxon Mobil-led consortium to launch crude production from Sakhalin-1."
  • NC Sep.29, p5: "Sakhalin-1 consortium agrees to supply 2 Bcm-3 Bcm/yr of associated gas to the Khabarovsk region."
  • NC: No date, "Gazprom and Royal Dutch Shell form working group to examine Gazprom's planned entry into Sakhalin-2 project."