Gazprom plans Vladivostok pipeline to lessen reliance on Europe


Russia's Gazprom committed more than €29 billion to develop an East Siberian gas field and build a pipeline to the Pacific port of Vladivostok in a bid to lessen its reliance on exports to Europe and develop Asian markets, amid falling demand from Europe.

Russian President Vladimir Putin has ordered Gazprom, the country's pipeline gas export monopoly, to forge close ties with fast-growing Asian and Pacific consumers, such as China and Japan, to offset sagging demand in Europe.

On Monday, Gazprom's Chief Executive Alexei Miller told Putin the company would invest 770 billion roubles (€18.9 billion) to build the 3,200-km pipeline from the East Siberian Chayanda deposit to Vladivostok.

He said 430 billion roubles (€10.6 billion) would be invested in development of the field.

"We can create another exporting centre oriented to Asia-Pacific region," Putin said, adding that the East Siberian region has huge gas resources.

Gazprom, in partnership with Japanese companies, plans to build a liquefied natural gas (LNG) plant in Vladivostok, which may come on stream by 2020 with production of between 10 million and 20 million metric tonnes.

Miller said the pipeline was expected to connect Vladivostok in 2017 with the field, which has estimated resources of 1.3 trillion cubic metres of gas.

"In the nearest future, we are able to create gas exporting capacity comparable to that of European gas exports," Miller said.

Gazprom's gas exports to Europe, where it covers a quarter of gas needs, are expected to fall this year from the 150 billion cubic metres it shipped in 2011.

Russia, the world's second-largest gas producer after the United States, has a sole LNG-producing plant, Gazprom-led Sakhalin-2 project, which produces 10 million tonnes of the frozen gas a year.

Gazprom's another LNG project, designed on the basis of Shtokman gas field in the Barents Sea, has been postponed due to costs overrun.

Gazprom will also develop other East Siberian fields, such as Kovykta, to feed the eastern route.

Gazprom sells its gas with considerable price differences. According to Russian government policy, gas in Russia is sold at a subsidised price, basically at loss. The company's profits come mainly from European customers, from which Gazprom gets about 60% of its revenue.

In many cases, it is obvious that Russia sells its gas at a political price. Belarus, a country with close relations to Moscow, pays $100 (€76) per 1,000 cubic metres, while Ukraine, another former Soviet republic, pays $416 (€314) per thousand cubic metres, trying to negotiate a fairer price at $250 (€189).

Gazprom delivers gas to 25 EU countries, the exceptions being Spain and Portugal. The vast majority of contracts to Europe are 20- to 25-year contracts.

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