Gazprom has fended off competition from Novatek to land a long-term licence for a gas-prospective block in the central part of Russia's Yamal Peninsula.

The remote region in West Siberia is a major gas-producing area and hosts huge liquefied natural gas developments.

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State controlled gas monopoly Gazprom won the 25-year exploration and development licence for the East Bovanenkovo block, ahead of compatriot gas independent Novatek.

According to Russia's Natural Resources & Environment Ministry, Gazprom has committed to paying 386 million roubles ($5.1 million) for the licence, just 89 million roubles above the starting price for the asset.

The block is located between the peninsula's largest onshore gas field, Bovanenkovo, which is operated by Gazprom, and the Upper Tiuteyskoye and the West Seyakhinskoye gas deposits.

These two smaller deposits are set to be developed to supply gas to the Novatek-led Obsky LNG project, which is expected on stream in 2025 or later.

Reserves issue

The East Bovanenkovo block is relatively small compared with other assets held by Gazprom, which as the largest gas producer in Russia has a strong reserves base.

Besides Bovanenkovo — with estimated recoverable gas reserves close to 4.9 trillion cubic metres — the company holds licences for several deposits on the Yamal Peninsula with significant confirmed gas reserves that can underpin production for several decades ahead.

According to Russian subsurface agency Rosnedra, East Bovanenkovo contains confirmed gas reserves of about 20 billion cubic metres following the drilling of a successful exploration well on the acreage in 1983.

Possible in-place resources are assessed at about 370 Bcm of gas and some oil and condensate.

Obsky LNG expansion

Some analysts had expected Novatek to show stronger interest in the block to add more reserves for Obsky LNG, projected to have an LNG capacity of just 5 million tonnes per annum.

Recent reports in Moscow have suggested that Novatek may have to re-configure the set-up of the Obsky LNG plant as Russian turbine manufacturers have been unable to deliver equipment with the necessary characteristics to suit Novatek’s in-house gas liquefaction process, Arctic Cascade.

Novatek has not commented on suggestions that, due to technical complications, it may have to switch to using a different liquefaction process from international providers at Obsky LNG.