Page 8 - FSUOGM Week 04 2020

FSUOGM INVESTMENT FSUOGM
Gazprom’s Baltic gas complex likely to cost more
RUSSIA
Cost estimates do not factor in the construction of port infrastructure.
THE cost of a major new gas processing com- plex Gazprom plans to build at the Baltic port of Ust-Luga is likely to be higher than its original $13bn budget, Russia’s Vedomosti reported on January 27.
The project is a 50:50 joint venture between Gazprom and Rusgazdobycha, a company affil- iated with Kremlin ally Arkady Rotenburg. It involves the construction of a hub capable of annually processing 45bn cubic metres (bcm) of natural gas into 19 bcm per year of treated gas, which will be exported via the Nord Stream 2 pipeline, along with 13mn tonnes of LNG, 3.6mn tonnes of ethane and more than 2.2mn tonnes of LPG.
Gazprom took a decision on its implementa- tion in March last year, and it is slated for com- pletion in 2023-2024.
Ethane from the project will be supplied to a nearby petrochemical plant that Rusgazdobycha plans to build on its own, via its Baltic Chemical Complex (BCC) subsidiary.
The $13bn estimate for the cost of the gas
processing complex does not cover construction of a marine terminal to ship LNG and LPG to markets, or an ethane storage facility, Vedomosti reported citing BCC documents. According to Vygon Consulting, the cost of port infrastruc- ture needed for a 13mn tonnes per year LNG export plant ranges between $0.8-1.4bn, while the necessary LPG infrastructure would cost up to $0.4bn.
As such, the project’s overall budget could reach as high as $14.8bn.
The cost of the LPG storage facility, on the other hand, is to be borne by RusGazDobycha alone. The facility will ensure uninterrupted supplies to the company’s petrochemical plant.
Gazprom had initially planned to build an LNG terminal only in Ust-Luga, able to export up to 10mn tpy of the super-chilled gas. It formed a joint venture with Shell to develop the project, but the Anglo-Dutch major pulled out after Gazprom opted for a larger integrated processing complex instead.™
OMV Petrom set to divest from Kazakh oil
KAZAKHSTAN
The assets are set to produce 8,000 boepd of oil and gas this year.
AUSTRO-ROMANIAN oil producer OMV Petrom has begun seeking a buyer for its assets in Kazakhstan, according to a sales document seen by Reuters.
The Romanian arm of Austria’s OMV oper- ates the Tasbulat concession area, containing three oilfields, in Kazakhstan’s western Man- gistau region, along with the nearby Komso- molskoye oil deposit. According to Reuters, the company has recruited investment bank Jefferies to manage the sale of these assets.
Bids from potential suitors will be accepted until March 27, the document stated, without indi- cating the assets’ value. Neither Jefferies nor OMV Petrom have officially commented on the matter.
OMV Petrom’s Kazakh business is set to pro- duce around 8,000 barrels of oil equivalent per day (boepd) of oil and gas in 2020, according to the sales prospectus, boasting 57mn barrels of oil equivalent (boe) in recoverable reserves. Its output was around 6,800 boepd in 2018, down from 7,100 boepd a year earlier.
“The portfolio includes growth opportunities from ongoing and identified projects including, but not limited to, improved oil recovery pro- jects,” the document said.
OMV Petrom’s investments in Kazakhstan
over the years have generally disappointed. Out- put at the Tashbulat fields has been constrained by operational issues, including pipeline leaks and unsuccessful drilling work. OMV Petrom started up the larger Komsomolskoye field in 2009 and had planned to raise production to a plateau rate of 10,000 boepd, through a water injection programme. Instead, extraction peaked at 7,000 boepd in 2012 and then began declining.
OMV holds a 51% stake in OMV Petrom, while the Romanian state controls 20.6% and state-backed investment fund Fondul Propri- etatea owns 10%. The remaining equity is split between smaller shareholders.
During the first decade of its independence, Kazakhstan was crowded with Western compa- nies searching for oil. But while majors still con- trol the country's three largest upstream projects - Kashagan, Karachaganak and Tengiz - Western investors have largely retreated from the coun- try's other, smaller projects.
They have mostly been replaced by large national companies from Asia, namely China. CNPC and other Chinese ventures now have rights to around a third of Kazakhstan's remain- ing oil reserves.™
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