Gazprom's executive board has recommended urgently boosting the Russian state controlled gas monopoly's upstream investments, with an additional 161 billion rubles ($2.1 billion) for spending in the fourth quarter of this year.
The proposal comes as Russian authorities look to increase efficiencies in Gazprom's operations, including field revitalisation projects to address declining gas production at its core legacy assets in West Siberia's Yamal-Nenets region.
Gazprom’s apparent inability to respond to rising gas demand in Europe this year, coupled with falling coal-powered generation, has helped spur an unprecedented tightening of the spot market for natural gas on the continent.
Prices approached $1000 per thousand cubic metres at European hubs earlier this week at one point, before easing back to about $800 per thousand cubic metres.
Gazprom said the proposed budget revision would result in the company's total capital investments exceeding 1 trillion rubles for the whole of 2021.
The company has not specified which greenfield and brownfield projects would get a financial boost, but industry analysts in Moscow suggest that developments on the Yamal Peninsula, hosting Gazprom’s newest assets, will be prioritised.
According to Gazprom, the greenfields closest to coming on line is the Kharasavey onshore field in the Yamal Peninsula and the Kamennomyskoye-more deposit, which lies in the shallow waters of Ob Bay, east of the peninsula.
Both fields are expected to produce first gas in 2023, with development drilling ongoing at Kharasavey.
Meanwhile, several Russian yards and manufacturers are close to completing construction of modules and caisson foundation parts for a drilling and production barge destined to sail off to Ob Bay next year.
The final assembly of the barge is expected to begin at a yard in the Russian enclave of Kaliningrad later this year or early 2022, according to Gazprom’s tender disclosure notices.
Yamal-Nenets Governor Dmitry Artyukhov has petitioned the Russian government to urgently audit Gazprom’s core legacy assets in the region and consider a reduction in the gas production tax to help ease brownfield investments.
According to Artyukhov, Gazprom had already extracted an estimated 19 trillion cubic metres of gas from legacy assets since the 1970s, with 6 Tcm of shallow reserves still in place.
Another 4 Tcm could be produced from deeper reservoirs beneath existing legacy fields, it is suggested.
However, the slow rate of brownfield investments may lead to output at Gazprom's legacy assets in Yamal-Nenets declining to 137 Bcm by 2040, against 297 Bcm last year, Artyukhov warned in his letter to the government, according to Moscow business daily Kommersant.