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OJSC Severneftegazprom — Great Example of Effective Russian-German Cooperation

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40 years ago supplies of Russian gas to the Federal Republic of Germany started. Cooperation that once seemed to be impossible had laid strong foundation for business collaboration between the two countries. The unique model of cooperation in the gas area between Russia and Germany has been built, and one of the successful examples of it is OJSC Severneftegazprom — a joint company of OAO Gazprom and German Wintershall Holding GmbH and E.ON Exploration & Production GmbH. OJSC Severneftegazprom continues the history of the long-term Russian-German cooperation at a new level; in this particular case it means not only gas supplies but also successful experience of joint investments in gas production.

Start of Fruitful Cooperation

In the early 1970-s the «Gas — Pipes» milestone deal, which supposed supply of large diameter pipes to the USSR for construction of a gas pipeline to Western Europe in exchange for a fee in form of gas developed at gas fields in Western Siberia, laid the foundation for the comprehensive energy supply system in Europe. Today Germany is the largest customer of Russian natural gas and Russia is one of the main suppliers of energy resources to the German economy. During years of cooperation more than one trillion cubic meters of Russian gas had been delivered to Germany.

Foundation of OJSC Severneftegazprom became another striking example of effective cooperation. In 2007 and 2009 Wintershall AG, a wholly owned subsidiary of BASF AG, and E.ON Rurhgas AG, a wholly owned subsidiary of E.ON AG, enter the project on developing the Yuzhno-Russkoye gas field as a result of an exchange of assets between OAO Gazprom and the largest German concerns. After starting the gas production at the Yuzhno-Russkoye gas field the Russian-German cooperation has moved to a whole new level and now it covers all stages of production process: beginning with geological surveys and finishing with gas distribution to the customers in Europe.

The Yuzhno-Russkoye gas field is one of the largest in Russia and unique by its structure and hydrocarbon resources, the total volume of which equals one trillion cubic meters of gas and 40 million tons of oil and gas condensate. 25 billion cubic meters of gas from 142 production wells are extracted here annually.

The blue fuel from the Yuzhno-Russkoye gas field is delivered to the Unified Gas Supply System and used as the resource base for supplies to Germany through the pipeline Nord Stream. Realization of this gas transmission project became a guarantee of stable and reliable gas supply to Europe for a long-term perspective. The participant companies share with each other risks in all segments in order to achieve unprecedented transparency in the energy field and to ensure the highest level of gas supplies reliability.

Gas of the Future

Any gas field passes following phases of development: active exploration and intensive growth of volume of raw materials recovery, stabilization of production at the maximum level, transition to stage of declining production and, finally, conservation. Cenomanian gas deposits of the Yuzhno-Russkoye gas field were brought to period of constant recovery in 2009; the highest production level of 25 billion cubic meters of gas is expected to be maintained up to 2021 according to the design studies. Then, the production will start to reduce gradually. Besides, the terms of operating with maximum volumes may be significantly increased at the expense of gradual input of Turonian gas deposits.

Turonian gas is considered as hard-to-recover and this feature adversely affects the cost-effectiveness of the design options and preclude from its traditional methods of production. Therefore, mainly with respect to mentioned above, till 2011 nobody in Russia developed these deposits. It is no coincidence that the pioneer of Turonian gas production became the joint Russian- German enterprise OJSC Severneftegazprom. Specialists of the company were required to find an unconventional approach to the production of Turonian gas, what was done by using the newest engineering solutions taking into account expert commentaries and great production experience of all participants of the project.

The decision was made to build a unique multilateral subhorizontal well with branched architecture of boreholes providing larger radius of drainage and effective vertically debugging of gas reserves. As a result on 5th December, 2011 the first Turonian gas from the Yuzhno-Russkoye gas field was delivered to the Unified Gas Supply System.

In February, 2014 OJSC Severneftegazprom started construction of the second pilot Turonian gas deposit well.

Geological and field information that will be obtained during the study of operating data of the two wells different by design will serve as a basis for choosing the optimal design decision on commercial production input of the Turonian gas deposits at the Yuzhno-Russkoye gas field.

Replacement of Cenomanian gas by the Turonian will be of double benefit for OJSC Severneftegazprom. Firstly, the operating capacities of the Yuzhno-Russkoye gas field are rated to production and supply of 25 billion cubic meters of gas annually to the Unified Gas Supply System, therefore, the period prolongation of constant production will provide operation in the most effective conditions much longer; this will improve the economy of the whole Russian-German project. Secondly, presence and use of prepared infrastructure will increase the profitability of the of Turonian gas deposits production.

At the moment in the Russian gas industry does not exist any experience of commercial production of Cenon-Turonian deposits. Attempts to produce Turonian gas have been made with the use of standard vertical wells, which are traditional and effective for Cenomanian deposits, but the gas yield levels turned out to be much lower than the profitability. Several gas producing companies prepare to develop the Cenon-Turonian deposits in a mode of pilot production, but real steps towards industrial production at the present moment are made only by OJSC Severneftegazprom.

The potential of Turonian gas production at the Yuzhno-Russkoye gas field is 5-8 billion cubic meters of gas annually.

According to the design project is expected to put the Turonian gas deposits into operation in several stages starting from 2019.

Corporate Management

Corporate management in OJSC Severneftegazprom is based on accurate distribution of liability of control bodies in order to guarantee maintenance of the shareholder interests and to increase investment attractiveness of the company.

The Board of Directors and Technical Committee, presenting the Board of Directors recommendations on all significant matters of OJSC Severneftegazprom activity, include representatives of all three shareholding companies. Owing to this structure optimal decisions making taking into account the interests of all parties is ensured; that in its turn increases the effectiveness and quality of OJSC Severneftegazprom control bodies operation.

Unconventional Approaches

The collectively developed financial structure of the Yuzhno- Russkoye gas field production in accordance with the «reservebased lending» principle became another evidence of fruitful Russian-German cooperation. This principle involves crediting on security of yet not extracted resources that increases creditors’ risks significantly. Professional approach of Russian and German financial experts for solving set tasks allowed to grade credit risks and to use planned incomes from gas sales as a basis for financing.

An international consortium comprising 14 foreign banks and the Russian Gazprombank (Open Joint Stock Company) in 2011 granted OJSC Severneftegazprom a credit totaling 1.1 billion EUR. In 2012 the Project Finance International (PFI) magazine declared this deal the deal of the year in the nomination «Gas Field Deal», besides, OJSC Severneftegazprom won the «Deal of the Year 2011» award by the Project Finance Magazine (PFM).

Environment Protection

Achievement of great industrial success in OJSC Severneftegazprom is placed among problem solving of decrease of negative impacts on the environment. Scientific and engineering knowledge received during the cooperation with the German partners promotes the implementation of technological innovations that meet requirements of environmental protection. Thus, the use of modernized internal arrangements in natural gas dehydrators allowed to reduce the triethylene glycol carryover, to increase productivity of devices and quality of gas dehydration. As for the innovational process gas losses management system after dried gas seals of gas compressor units, which was developed by specialists of OJSC Severneftegazprom, it has reduced emissions in CO2 equivalent only from two units operated at the gas field to 13 377 tons per year.

The company implemented and maintains the Integrated Quality, Environmental and Safety Management System in proper working order in accordance with ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007 international standards requirements. Besides, OJSC Severneftegazprom has implemented an ecological monitoring program, which allows to obtain impartial information on sources of hazardous emissions as well as to control and to develop effective environmental measures.

Positive Prospection

Success achieved by OJSC Severneftegazprom is a result of strategic Russian-German cooperation. Employees of the company and representatives of the shareholders hold business meetings on a regular basis for discussing results of operating performance and consideration of prospects of their further interaction.

The joint work allows applying international experience, getting unique knowledge, mastering advanced methods of operation and best practices of making business. For this purpose OJSC Severneftegazprom affiliated the European Business Congress, which unites leading representatives of the business community of the Organization for Security and Co-operation in Europe (OSCE) member countries in January, 2014. The Congress is developing proposals for removal of obstacles in the economic cooperation and creation of favorable conditions for the efficient and safe entrepreneurial business maintenance.

Each participant of the large scale project of OJSC Severneftegazprom contributes to the joint operation, as a result of that the experience of OAO Gazprom, gained during the development of gas fields in harsh weather conditions and the permafrost of the Far North, is naturally complemented by advanced experience of German enterprises — this makes the joint company one of a kind and serves as a reliable basis for successful development.

          OJSC Severneftegazprom is one of the largest Russian gas producing companies. Company’s shareholders are OAO Gazprom (50% + 6 ordinary registered shares), Wintershall Holding GmbH (25% – 3 ordinary registered shares + 3 preferred shares with nonvoting right) and E.ON Exploration & Production GmbH (25% – 3 ordinary registered shares + 3 preferred shares with nonvoting right).

         OJSC Severneftegazprom pays special attention to the regions of its industrial activity. Within several years the company organizes summer recreation in Germany for children who belong to indigenous people of the North and children from families with low income and large families.

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Source:Gas Business

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