Shrinking demand puts Yamal gas plans in jeopardy

Europe might not need the Yamal gas after all.

Gazprom slashes gas production plans at the huge Bovanekovo field and could be forced to radically change its grand development scheme for the gas-rich Arctic peninsula.


Gazprom representative Vsevolod Cherepanov this week confirmed that 2013 gas production at Bovanenkovo will amount to 29,5 billion cubic meters, more than 30 percent less than the original schedule. The reason, Cherepanov said, is the shrinking international demand on Russian gas, reports.

Originally, Gazprom this year planned to produce as much as 46,3 billion cubic meters at Bovanenkovo, the regional flagship field with reserves estimated to 4,9 trillion cubic meters. By 2017, production at the field is to rise to 115 billion cubic meters per year, and later to 140 billion. In addition, Gazprom has ambitious plans for the development of several nearby fields, among them the Kharasaveyskoye and Kruzensternskoye.

The Bovanenkovo field was officially launched in October 2012. With its development costs of $41 billion, it is among this decade’s most expensive industrial projects in the world. In addition to field development, Gazprom has laid a 1240 km long new pipeline to the field, constructed a more than 500 km long railway line to the site, as well as built a new Yamal airport.

Now, the future of Bovanenkovo and the other Yamal fields appear increasingly uncertain following the rapid changes in international gas markets. Gazprom in 2012 got its exports to the EU, the company’s key international market, reduced by eight percent.

Speaking at the press conference, Cherepanov confirmed that his company’s output is significantly below capacity. While the company is able to produce up to 600 million cubic meters of gas, it will in 2013 produce only 495,7 million, the company representative said. In 2012, the company’s production amounted to 487 million cubic, reports.