Geotransgaz embarked on self-sufficient sales of natural gas

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Geotransgaz embarked on self-sufficient sales of natural gas. The company launched an inauguration ceremony on December 12, 2012 to start supplies to the gas transportation system of Gazprom from the Valanginian Production Field within the Beregovoye Gas Deposit.

To provide sales and fulfill its sales plan, Geotransgaz made a mid-term contract for the supply of natural gas to Rosneft until 2015. Under this three-year contract, Rosneft will receive about 7 billion cubic meters of natural gas.

The commissioning of Phase 1 in the Valanginian Production Field within the Beregovoye Gas Deposit able to yield 1 billion cubic meters of gas and 300,000 tons of gas condensate per year, as well as the conclusion of a contract to supply natural gas at market prices makes it possible for Geotransgaz to start generating cash flow on its own and take its place among the independent Russian gas producers. It is expected that in 2013 Geotransgaz will gain approximately RUB 5.6 billion in revenues.

Geotransgaz was acquired by ALROSA in 2006, along with Urengoy Gas Company. According to international auditor DeGolyer & McNaughton, total reserves currently owned by Geotransgaz and Urengoy Gas Company in their licensed areas in the Yamal-Nenets Autonomous District are estimated at 187 billion cubic meters of natural gas and 26.4 million tons of gas condensate. The estimate of Geotransgaz’s and Urengoy Gas Company’s investment potential suggests that these assets are quite promising and at the peak of production may generate 6 billion cubic meters of gas and 1.2 million tons of condensate.

Since 2010, ALROSA’s total investments in the development of gas assets amounted to almost RUB 10 billion. Thus, in 2012 ALROSA invested about RUB 4.5 billion in Phase 1, which involved the completion of the liquefied natural gas processing plant (about RUB 2 billion), drilling gas wells and their infrastructure development (about RUB 590 million), construction of roads and power lines (about RUB 550 million). In October 2012, the company finished the construction of a pipeline connecting the gas fields of Geotransgaz to the gas transportation system of Gazprom.

It is assumed that further implementation of the investment program will increase overall revenues generated by the gas assets to RUB 20 billion a year. Given the fact that both companies are stationed in an area with developed infrastructure, their management will be able to handle costs and operating expenses efficiently. ALROSA still retains plans to reduce its involvement in non-core assets by attracting strategic partners. Starting self-sufficient operation, Geotransgaz turns into a full-fledged mining company from a mere license holder, thus enhancing its attractiveness to investors.

This page was last updated on 12 December 2012 at 14.17