1.2 Gas Supplies to Russian and International Consumers
The Gazprom Group’s hydrocarbon reserves are evaluated in accordance with the Russian classification and the international PRMS standards.
Gazprom Group's gas reserves in the Russian Federation in accordance with the Russian and international classifications, 2015–2018 (including the share in reserves of organizations in which Gazprom has investments classified as joint operations), gas, bcm
|Indicator as of December 31||2015||2016||2017||2018|
|Explored reserves in accordance with the Russian classification (А+В1+С1)(1)||36,147.3||36,443.9||35,355.4||35,195.3|
|incl. (А+В1+С1)(1), that passed evaluation in accordance with PRMS standards||94.2%||95.4%||94.1%||93.0%|
|PRMS proven and probable reserves||23,705.0||23,855.1||24,146.6||24,255.1|
(1) In accordance with the new Classification of Reserves and Resources of Oil and Flammable Gases (approved by the Order No. 477, of November 1, 2013, of the Russian Ministry of Natural Resources and Environment), in effect from January 1, 2016, corporate reporting procedures must record reserves of the А+В1+С1 category, which comprises explored reserves with a high degree of geological certainty and correspond to the previously applicable categories of А+В+С1.
Adjustment of natural gas reserves under the new Russian Classification of Hydrocarbon Reserves, as reflected in the corporate reporting (the recoverable reserves), is attributed to geological exploration and prospecting (GPE), licensing activity and the application of the gas recovery factor (GRF). Booking additional reserves was the result of GPE operations in the YaNAA, in the Kara Sea and the Sea of Okhotsk, in the Eastern Siberia and in the Far East, as well as acquisition of licenses for field development in the Nenets Autonomous Area. The decline of recoverable reserves was driven mainly by application of the GRF approved under the development projects in accordance with the rules of the new Russian reserves classification at the Yamburgskoye (Cenomanian), Bovanenkovskoye, Yuzhno-Russkoye, Chayandinskoye, Yen-Yakhinskoye and Kirinskoye deposits. Additional impact was produced by hand-over of the Semakovskoye, Parusovoye and Severo-Parusovoye deposits to RusGazAlliance LLC joint venture, which reserves are not consolidated in the Gazprom Group.
As of the end of December 2018, the Gazprom Group’s PRMS proven and probable reserves of natural gas were 24,255.1 bcm. The increase of gas reserves in accordance with the international PRMS standards by 550.1 bcm between 2015 and 2018 was driven by adding new reserves to the audit (Jurassic sediments of the Bovanenkovskoye field, Cretaceous and Jurassic deposits of the Yubileynoye Field, Yuzhno-Lunskoye, Naryksko-Ostashkinskoye and Taldinskoye fields), booking the GPE results (at the Kharasaveyskoye, Yuzhno-Kirinskoye, Kovyktinskoye, Chayandinskoye, Tambeiskoye, Malyginskoye fields), recalculation of reserves and review of development projects at the Yamburgskoye and Yen-Yakhinskoye fields, as well as by the investment decisions regarding the Novoportovskoye field’s gas transportation and sales made by PJSC Gazprom Neft in 2018.
Resource base development plans
In 2019, gas reserves replacement shall be achieved through GPE and by continued recording in the State Balance recoverable gas reserves with officially confirmed GRF values.
In 2018, the Gazprom Group’s production of natural and associated petroleum gas (APG) reached 497.6 bcm (498.7 bcm including the Group share in production of organizations in which Gazprom has investments classified as joint operations), which is 5.7% or 26.6 bcm more than in 2017.
Gazprom Group's gas production in the Russian Federation(1), 2015–2018, bcm
(1) Excluding organizations, in which Gazprom has investments classified as joint operations.
The Nadym-Pur-Taz (YaNAA) was the main gas production region of the Gazprom Group in 2018. Gazprom also develops strategic gas production centres in the Yamal Peninsula, in the Eastern Siberia and in the Far East, at the continental shelf of the Russian Federation.
Commissioning of the Gas Production Facility No. 3 at the Bovanenkovskoye Deposit was one of the key events at the newly established Yamal gas production center in 2018. Its launch is going to bring gas production from the Cenomanian-Aptian deposits of that field to the design level of 115 bcm per year. The field is expected to be in operation until 2128.
In compliance with the Eastern Gas Program, gas production centres are developed in the Eastern Siberia and in the Far East. Pre-development operations continued at the Chayandinskoye OGCF in 2018: construction of production and power assets, as well as transportation infrastructure was continued, drilling of 136 producing gas wells was completed. The field shall be commissioned at the end of 2019.
In 2018, pilot commercial development of the Kovyktinskoye GCF included research of the theoretical production capacity of the existing producing wells, and construction and installation works. Operation of the Kovyktinskoye GCF shall start in late 2022.
At the continental shelf of the Russian Federation, pre-development operations are continued at the Kirinskoye and Yuzhno-Kirinskoye fields in the Sea of Okhotsk that are a part of Sakhalin-3 Project. At the Kirinskoye GCF, commercial development was started in 2014. The activities aimed at expanding the Kirinskoye field shall be completed by 2021.
At the Yuzhno-Kirinskoye field, production wells drilling started in 2018. Own floating semi-submersible drilling rigs, Polyarnaya Zvezda (Polar Star) and Severnoye Siyaniye (Northern Lights), are used in course of wells drilling. The field shall be commissioned in 2023.
For more information on the Gazprom Group’s projects abroad, see the section “International exploration and production projects of the Gazprom Group at the prospecting and exploration stage” of Gazprom in Figures 2014–2018 Factbook
In addition, Gazprom participates in several international projects that are at oil and gas production stage. The Ipati — Aquio blocks (Bolivia) is one of the largest projects by natural gas production volumes.
Gas Production Plans
The Gazprom Group plans to produce 495.1 bcm of gas (including 16.0 bcm of APG)Net of gas production by organizations, in which Gazprom has investments classified as joint operations in 2019. Increase of gas production at the existing fields and commissioning new fields remain among the priority tasks, which creates the long-term potential for supplying gas to Russian customers and implementation of major export projects.
Gas reserves replacement
Under the Long-Term Development Program for 10 years and the Mineral Resources Base Development Program until 2040, Gazprom makes focused efforts aimed at replacing hydrocarbon reserves and preparing them for commercial development. The Mineral Resources Base Development Program until 2040 stipulates extended replenishment of the mineral resources base taking into account the changing reserves structure and the shift of hydrocarbons production center to the new regions: to the Yamal Peninsula, the Eastern Siberia, the Far East, the shelf of the Russian Federation.
In 2018, Gazprom Group’s А+B1+C1 reserves increment achieved through GPE in the Russian Federation amounted to 796.6 bcm.
Most of the gas reserves increment was achieved at the Leningradskoye field at the Kara Sea shelf (667.4 bcm) and the Yuzhno-Kirinskoye field at the shelf of the Sea of Okhotsk (100.9 bcm). In 2018, three fields were discovered: Neptune and Triton at the shelf of the Sea of Okhotsk (the total recoverable С1+С2 oil reserves are 115.1 mmt), Blizhnenovoportovskoye (YaNAA), as well as 12 new deposits at the previously discovered fields in the YaNAA, KhMAA — Yugra, Tomsk Region, Orenburg Region and at the Kara Sea shelf. In addition, organizations, in which Gazprom has investments classified as joint operations, discovered the Vostochno-Talovskoye field in the Tomsk Region and three deposits in KhMAA — Yugra.
As conventional reserves are depleted, hydrocarbons production would be associated mainly with development of new remote areas.
Development of unconventional and hard-to-recover gas resources requires implementation of efficient technologies based upon innovative solutions. Russia has significant resource potential of unconventional gas sources. The Gazprom Group studies them and develops technologies for their discovery, exploration and commercial development.
Gas reserves in tight terrigenous rock coal-bed methane reserves are prepared best, they are already at the pilot development stage. No efficient technologies were developed for gas production from gas-hydrate deposits anywhere in the world, therefore, such tremendous resources could be developed only in the long term. Shale gas production is not particularly attractive for PJSC Gazprom in the medium- and long term due to economic and environmental advantages of conventional gas.
The target hydrocarbon reserves replacement target for 2019 is 625.3 million tons in terms of reference fuelNet of Gazprom Neft Group and organizations, in which Gazprom has investments classified as joint operations, including 523.9 bcm of gas. Most of the gas reserves increment should be achieved at the Kovyktinskoye, Kruzenshternskoye and Dinkov fields.
In course of gas processing, the Gazprom Group produces valuable components like ethane, propane, butane, helium that are used as feedstock for gas chemical products.
Natural and associated petroleum gas processing volumes in real terms, 2015–2018, bcm
|PJSC Gazprom and main subsidiaries||30.64||30.06||29.94||30.14|
|Gazprom Neftekhim Salavat||0.44||0.49||0.43||0.46|
|Gazprom Group, total||31.18||30.99||30.82||31.05|
In 2018, the Gazprom Group processed 31.05 bcm of natural and associated petroleum gas (tolling arrangements excluded).
Gas Processing Plans
In 2018, PJSC Gazprom and JSC RusGazDobycha signed the agreement on implementation of the project aimed at construction of the GPP for gas processing and liquefaction in the vicinity of the Ust-Luga settlement (Leningrad Region). That project entails, in particular, processing 45 bcm of gas per year. The feedstock will be ethane-containing natural gas produced by Gazprom from the Achimov and Valanginian deposits of Nadym-Pur-Taz Region fields.
Construction of the Amur GPP (Amur Region) is in progress. It would be the global leader by helium production (the design capacity is up to 60 mcm of helium per year), as well as one of the largest natural gas processing facilities in the Russian Federation (42 bcm of multicomponent gas from Yakutia and Irkutsk gas production centres, with the potential to increase it to 49 bcm per year).
Gazprom’s gas transmission system (GTS), being a part of the UGSS, has a unique scale and technological infrastructure. As of the end of 2018, the length of the Group’s gas trunklines and branch connections in the Russian Federation was 172,600 km. The GTS facilities included 257 CS with 3,814 gas compressor units (GCU) having the total capacity of 46,900 MW. During the reporting period, Gazprom commissioned 890.8 km of gas trunklines and branch connections in Russia. The GTS received 693.1 bcm of gas which is 3.1% more than in 2017.
Gazprom develops the GTS consistently in order to improve security of supplies. In the northern area, the line section of the Ukhta — Torzhok 2 gas trunkline was commissioned in 2018. Construction of the cross-border Nord Stream 2 gas pipeline is in progress.
For more information on Gazprom gas pipeline development projects see the Gazprom Group’s major gas transportation projects section of Gazprom in Figures 2014–2018 Factbook
In the eastern area, main construction works were completed at the line section of the Power of Siberia gas pipeline from the Chayandinskoe field to the Chinese border in 2018.
In the southern area, the TurkStream gas pipeline construction is in progress. In November 2018, deepwater installation of two strings of the gas pipeline was completed ahead of schedule at the bottom of the Black Sea.
Gazprom set two world records in course of the TurkStream gas pipeline construction. The speed of deepwater offshore gas pipeline installation reached 6,330 m per day for the first time ever and anywhere in the world. And for the first time ever anywhere in the world, 812-mm diameter pipe was installed at a 2,200-meter depth.
GTS Development Plans
Gas export supplies to China are expected to be started from December 1, 2019, using the Power of Siberia gas pipeline. At the end of December 2019, TurkStream shall be commissioned, and up to 31.5 bcm of gas per year is expected to be exported through its two strings. Nord Stream 2 shall also be commissioned at the end of December 2019, its capacity is expected to reach 55 bcm of gas per year. In addition, it is planned to continue construction of gas transportation facilities from Gryazovets to the Slavyanskaya CS to supply gas to Nord Stream 2 and to the customers in the Leningrad Region.
Protective zones are necessary to ensure Safety of people and integrity of pipelines
Vyacheslav Mikhalenko, Member of the Management Committee and Head of Department at PJSC Gazprom
Why are the protective zones and minimal distances to gas pipelines necessary? What documents describe the requirements to them?
Gas trunklines facilities are highly hazardous, as they contain high-pressure explosive substance (gas).
Protective zones are necessary at the gas trunkline facilities in order to ensure their safekeeping, mitigate the risk of damage by third parties, create normal operating conditions and prevent accidents. The minimal distances are established in order to protect people’s lives and health in case of an emergency. The borders of the minimal distances show the areas of potential thermal damage in case of accidents at the gas trunkline facilities. And such minimal distances significantly exceed the size of the protective zones.
Compliance with the protective zones and the minimal distances is stipulated by Federal Law No. 69-FZ dated March 31, 1999 “On Gas Supply in the Russian Federation”.
In 2018, Federal Law No. 342-FZ “On Amendments to the Urban Planning Code of the Russian Federation and Certain Legislative Acts of the Russian Federation” became effective, and pursuant to Article 105 of the RF Land Code the protective zones and the minimal distances to gas trunkline facilities were included for the first time in the list of use-restricted zones.
Information on the borders of protective zones and minimal distances to gas trunkline facilities are specified in the gas pipeline design documents and area planning documents, as well as included in the Federal State Land Use Planning Information System.
In addition, upon completion of the gas trunkline construction or renovation, the operating entity shall submit information on its actual location to the local authorities.
Who is responsible for compliance with the minimal distances in case of construction in the protective zones of gas pipelines?
Those matters fall within competence of municipal executive bodies that provide land plots to individuals and determine the permitted types of their use, issue construction permits and have the authority over urban development and land use planning matters.
It should be stressed that the legislation explicitly prohibits any facilities construction within the protective zones and within minimal distances.
In order to mitigate the impact of accidents, PJSC Gazprom subsidiaries also control compliance with the minimal distances. Their areas of responsibility are along the operated gas pipelines and they are defined by the appropriate orders.
The activities that are not prohibited by the Gas Trunklines Protection Rules, other than agricultural activities, may be carried out in the protective zones only upon a written permission of the operating subsidiary. And in such case, the list of activities required to ensure safety of people and safekeeping of equipment must be defined.
What approaches are used currently to ensure compliance with the protective zones when populated areas are expanded?
We realize the importance of eliminating the existing breaches and mitigating the social tension associated with that issue. PJSC Gazprom subsidiaries hold sensitization campaigns explaining to the developers the need to stop construction works and other activities that are prohibited in the protective zones and within minimal distances, and explaining the breaches of the established safe distances to the owners of the land plots and buildings as well as their obligations pertaining to compliance with the legislation. The local authorities are notified of the identified breaches. We are also in continuous dialogue with the federal executive authorities aimed to develop the measures for countering spontaneous development in protective zones and zones within minimal distances and to ensure that the location of gas trunkline facilities is taken into account while the borders of the populated areas are expanded.
PJSC Gazprom considers the possibility of developing a feasibility study for the program aimed at eliminating breaches in the areas of high concentration of residential buildings and within the borders of populated areas.
A part of those activities is already in progress: for example, renovation of the Shebelinka — Belgorod — Kursk — Bryansk gas trunkline section between 120th and 160th km entails relocation of the gas pipeline outside the future development area in Belgorod where about 1,000 facilities breaching the minimal distances are registered within the city line, including garages, residential buildings, railway tracks.
Gas Storage in Russia
The Gazprom underground gas storage facilities (UGS) are used to ensure uninterrupted gas supply during the peak-demand winter periods and are located in the main consumption areas. The Group operates 23 UGSs in 15 constituent entities of the Russian Federation. UGS operation is supported by 20 CSs and 217 GCUs with the total capacity over 942.3 MW, the operating well stock consists of 2,705 wells.
By the beginning of 2018/2019 withdrawal season, the potential maximum daily capacity of the Russian UGSs increased up to 812.5 mcm of gas. The increment vs 2017/2018 was 7.2 mcm. From 2010 to 2018, the potential maximum daily capacity of the UGSs increased by 31%. The operating reserve of gas in the Russian UGSs was 72.2 bcm by the beginning of 2018/2019 withdrawal season.
PJSC Gazprom adheres to the requirements of the anti-monopoly legislation providing gas storage services to independent producers and ensuring that equal conditions are applied when gas injection, withdrawal and storage are organized in the UGS in compliance with the approved standard agreement.
The service price is established for each UGS separately and depends upon its operating costs, gas injection volumes and other economically justified indicators taking into account the technological features of the facility and does not depend upon the category of the customer.
Gas Storage Abroad
Gazprom uses UGSs located in several European countries: Austria (Haidach), Germany (Reden, Katharina), the Netherlands (Bergermeer), Czechia (Dambořice), Serbia (Banatski Dvor), Armenia (Abovyanskoye Underground Gas Storage Unit) and Belarus (Mozyrskoye, Osipovichskoye, Pribugskoye UGSs). In order to bring the volume of gas storage abroad to 5% of exports, Gazprom is concluding agreements for storage facilities lease in Europe in addition to own UGS.
UGS Development Plans
In 2019, the total working capacity shall reach 75,063 bcm as related to Russian UGSs development. By the beginning of 2019/2020 withdrawal season, the potential maximum daily capacity of the UGSs in the Russian Federation would be increased up to 843.3 mcm of gas.
In addition, the capacity of gas storage facilities shall be expanded in Europe by the beginning of 2019/2020 gas withdrawal season. The Banatski Dvor UGS expansion project is in progress (in collaboration with JP Srbijagas, Serbia), which implies the increase of the total working capacity of that storage to 750 mcm.
Gazprom is the key natural gas supplier at the Russian market. The Group supplies gas in eight federal districts, to 68 constituent entities of the Russian Federation, with the largest supply volumes being accounted for by cities of Moscow and St. Petersburg, the Moscow and Samara Regions, and the Republics of Tatarstan and Bashkortostan. In 2018, Gazprom sold to the customers in Russia 239.7 bcm of gas, which is 9.8 bcm or 4.3% more than in 2017.
Improvement of Domestic Pricing Mechanisms
Pursuant to Decree of the President of the Russian Federation No. 618 dated December 21, 2017 “On Key Features of the Public Policy Aimed at Competition Development”, the National Competition Development Plan of the Russian Federation in 2018–2020 was approved, and one of the most expected outcomes of that plan shall be transition to market gas pricing in case of supply to industrial customers by the end of 2020.
PJSC Gazprom participates in staged transition to market gas pricing for industrial customers. New unregulated segments are established at the domestic gas market and PJSC Gazprom is authorized to pursue a flexible pricing policy thereGas supply at the domestic market to companies operating export-oriented LNG production projects, as well as to organizations for producing methanol from gaseous natural gas for subsequent export.
PJSC Gazprom develops and submits to the Government of the Russian Federation and the federal executive agencies justified proposals on further transition from gas prices regulation to regulating tariffs for gas transportation services using PJSC Gazprom gas trunklines. At the same time, it is proposed to preserve regulation of wholesale gas prices for residential customers.
Gas Infrastructure Expansion and Gas Supplies in Russian Regions
Gas infrastructure development and gas supply to the regions of Russia are among strategically important activities of Gazprom. In 2018, 66 constituent entities of the Russian Federation participated in the Regional Gas Infrastructure Development Program. Gazprom investments under the Program amounted to RUB 36.7 billion in the reporting year.
Gas distribution and gas infrastructure development in the Russian Federation(1), 2015–2018
|As of December 31||2015||2016||2017||2018|
|Length of gas distribution grid pipelines serviced by Gazprom’s subsidiary and affiliated gas distribution organizations (GDOs), thousand km||697.6||710.9||732.0||744.8|
|Natural gas transmitted through gas distribution systems serviced by Gazprom’s subsidiary and affiliated GDOs, bcm||213.9||218.7||220.3||227.8|
|Customers served by Gazprom’s subsidiary and affiliated GDOs:|
|apartments and private households, million units||25.1||25.4||25.9||27.1|
|industrial facilities connected to gas grids, thousand units||31.0||30.7||29.9||30.7|
|municipal and public utility installations connected to gas grids, thousand units||279.2||287.4||307.7||313.8|
|agricultural facilities connected to gas grids, thousand units||6.4||6.7||7.2||7.7|
|Gazprom financing of gas infrastructure development programs, RUB billion||27.6||25.0||29.45||36.7|
(1) Net of Gazprom Transgaz Kazan LLC.
In 2018, penetration of gas infrastructure increased in Russia from 68.1% to 68.6%. The total of 2,019 km of gas pipelines (146 facilities) were constructed, and conditions for connecting 49,100 households and apartments and 210 boiler houses to gas grids were created at 272 settlements.
Throughout the term of the Program implementation, from 2005 to 2018, over 90% of gas pipelines were constructed in the regions for rural gas infrastructure development. Their total length amounted to about 30,000 km. Conditions for connecting to gas grids were created in more than 752,000 households, over 5,000 boiler houses and businesses in almost 4,000 villages and settlements. Therefore, in 2005–2018 gas infrastructure penetration in the rural areas of the Russian Federation increased 1.7 times — from 34.8% to 59.4%.
In the remote and hard-to-access areas where pipeline gas supply is not feasible from economic and technological point of view, autonomous gas supply systems are used. Such systems entail use of alternative energy sources: LNG, compressed natural gas (CNG) and liquefied petroleum gases (LPG).
In 2018, construction of a marine gas receipt terminal and the only floating storage and regasification unit (FSRU) in Russia, Marshal Vasilevskiy, was completed in the Kaliningrad Region. That vessel transports LNG (the reservoirs capacity is 174,000 cubic meters) and performs its regasification, i.e. LNG conversion from liquid to gaseous state. The terminal and the FSRU enable marine delivery of natural gas and are able to meet the current and the future demand in the Kaliningrad Region, if necessary.
Regional Gas Infrastructure Expansion Program: Implementation Issues
The key issues faced in course of the Regional Gas Infrastructure Expansion Program in Russia implementation are incomplete utilization of gas pipeline branches due to customers being not ready to receive gas, as well as unsatisfactory payment discipline of the customers with regard to payments for natural gas supplied.
Only 10 out of 66 constituent entities of the Russian Federation that participated in the Gas Infrastructure Expansion Program in 2018 discharged of their obligations in full. Other regions are lagging behind the activity synchronization schedules significantly.
Gazprom continues systemic work aimed at enhancing payment discipline of the Russian customers.
Questions from stakeholders
Question from customers
Which area of responsibility do household gas explosions belong to?
In 2018, according to Gazprom Mezhregiongaz LLC information, there were 97 accidents associated with explosion or ignition of gas-air mixture. The key reasons of such accidents were: unauthorized intervention of the individuals in the structure of the consumer gas piping, i.e. repair, replacement, installation of equipment or gas pipelines, or their connection to the source of gas, etc; breach of the safe operation rules; use of equipment in case of draft interruption in smoke or ventilation channels.
It should be remembered that the person managing the real estate or the household owner are legally responsible for ensuring proper condition and normal operation of smoke and ventilation channels, and the owners of gas equipment are responsible for its due maintenance.
Plans for Gas Infrastructure Expansion and Gas Supplies to Russian Regions
Gazprom intends to accelerate the pace of gas infrastructure development in the regions by 1% in 2019. The plans include construction of 112 facilities with the total length of approximately 1,700 km in 28 regions of Russia. Conditions for connection to gas grids will be created in 143 settlements covering about 44,000 households and apartments and 171 boiler houses. In 2019, the Regional Gas Infrastructure Development Program of the Russian Federation, like in 2018, includes 66 regions. The investments will amount to RUB 34.3 billion.
Over 13 years, gas infrastructure penetration increased in Russia from 53.3% to 68.6%
Gennady Sukhov, Member of the Management Committee and Head of Department at PJSC Gazprom
What should we do to make sure that our settlement is included in the Gazprom’s Gas Infrastructure Expansion Program?
PJSC Gazprom defines the Gas Infrastructure Expansion Program proceeding from the proposals of regionals administrations that are governed by economic feasibility and the outlook of social and economic development of the regions or districts. Therefore, in order to make sure that inclusion of a particular settlement into the Program is considered, the appropriate request shall be sent to the local administration.
How much did gas infrastructure penetration increase in Russia during the Program implementation period? When will pipeline gas supply in Russia reach 100%?
Gas infrastructure penetration increased in Russia in 2005–2018 by 15.3 percentage points (p. p.) — from 53.3% to 68.6%, in particular, it increased in the cities to 71.9%, and in the rural areas to 59.4%.
It should be mentioned that pipeline gas supply is economically or technologically unfeasible in many settlements. In such cases we use other methods, e.g. autonomous gas supply.
How are settlements connected to gas grids under the Gazprom’s Program? Who finances different stages of works?
Gazprom is responsible for construction of gas pipelines between settlements and the required gas infrastructure up to the borders of the settlements. And regional authorities are responsible for gas distribution pipelines construction within settlements and for bringing gas to end customers.
In certain regions, population’s funds are used for financing street gas distribution grids construction. The amounts of participation are established by the local authorities and depend upon the budget resources.
Construction of the gas pipeline from the street grid to the basement of the house, including the subscription fee for connection, is usually financed by the house owner. The amount of costs depends upon the type of gas pipeline (underground or surface), its length and pipes used (steel or polyethylene). The population finances procurement and installation of gas equipment in residential premises. In case of complex gas infrastructure development and centralized equipment supply, its price is lower. In most cases, when a household is connected to the gas grid, the customers initially install only gas ovens.
Does the regional customers debt for gas supply affect their participation in the Gas Infrastructure Expansion Program?
The regional customers debt for gas supplied has the direct impact upon the amount of investments allocated by Gazprom to gas infrastructure expansion in such regions. Numerous failures to make payment can adversely affect implementation of the Gas Infrastructure Expansion Program, since they are taken into account when feasibility of gas pipelines construction is determined.
In 2018, PJSC Gazprom gas suppliesPJSC Gazprom’s international gas sales under contracts of Gazprom Export LLC, including volumes sold via the ETP and in course of trading operations and under direct contracts of GAZPROM Schweiz AG to European, other than FSU, countriesEuropean other than FSU countries means the European Union countries (other than Estonia, Latvia and Lithuania), as well as Albania, Bosnia and Herzegovina, Macedonia, Norway, Serbia, Switzerland and Turkey reached 201.9 bcm, having increased by 7.5 bcm or by 3.8% vs 2017. PJSC Gazprom share of gas salesPJSC Gazprom’s international gas sales under contracts of Gazprom Export LLC, including volumes sold via the ETP and in course of trading operations and under direct contracts of GAZPROM Schweiz AG in European gas consumption of other than FSU countries reached the record level of 36.8% (+2.6 p.p.), and in the importsDifference between consumption and domestic production taking into account withdrawal from and injection to the UGS of those countries it increased to 67.1% (+3.4 p.p.). The largest gas supply volume, being the maximum over the company history, was registered in Germany — 58.5 bcm, which is 5.1 bcm (+9.5%) more than in 2017.
Questions from stakeholders
Question from the representative of the investment community
Does Gazprom collaborate with Iranian companies?
The Company studies business opportunities in Iran taking into account the requirements of the Russian Federation law, international law provisions, as well as economic, production and legal risks.
In 2009–2017, Gazprom signed several non-binding memoranda of understanding with Iranian companies. No investment or production activities are carried thereunder. The PJSC Gazprom representative office operates in Iran without any right to carry out any commercial activities.
Gazprom GroupNet of Gazprom Neft Group has representative offices in Austria, Azerbaijan, Algeria, Bangladesh, Belgium, Bulgaria, Bolivia, Brazil, Venezuela, Vietnam, Germany, Greece, India, Iran, Kazakhstan, Qatar, Kyrgyzstan, China, Latvia, Macedonia, Moldova, Nigeria, Poland, Romania, Tajikistan, Slovakia, Turkmenistan, Turkey, Uzbekistan, Ukraine, Finland, Czechia, and Japan.
Gazprom holds a diversified LNG trading portfolio and supplies it to the Asia-Pacific Region (APR), Middle East and European countries. In 2018, international LNG sales from the Group trading portfolio reached 3.88 mmt (5.18 bcm), which is 16% more than in 2017. In 2018, there began LNG supplies under long-term LNG offtake contracts from Yamal LNG and from the floating LNG plant in Cameroon; in addition, LNG supplies started under the long-term sale and purchase agreement with Indian company GAIL. Share of LNG (from Sakhalin II project) reached 38% of the Gazprom Group’s LNG supply to foreign countries.
The key destination for international supply of LNG from the Gazprom Group’s trading portfolio is APR (76% of supplies). In 2018, Indian market accounted for the largest LNG supply volume from the Group trading portfolio — approximately 20% of the total sales.
In 2018, construction of the Baltic LNG plant, LNG production, storage and shipment complex near the Portovaya CS, as well as the increase of the LNG plant capacity at the Sakhalin II project were continued.
For more information on future LNG projects, see the Section “Promising large scale LNG projects with Gazprom Group’s participation” in Gazprom in Figures 2014–2018 Factbook
Small Scale LNG Supplies
An important area of the LNG market development is construction of small-capacity LNG plants having the capacity of up to 1 million tons per year in accordance with the International Gas Union classification.
Small-capacity LNG production is carried out at the Gazprom Group and Gazprom Gazomotornoye Toplivo LLC plants located in the Leningrad Region (Peterhof town), Kaliningrad Region (Bolshoe Isakovo settlement), Sverdlovsk Region (Yekaterinburg and Pervouralsk), Perm Territory (Kanyusyata village). Export supplies are also performed from the plants in Kingisepp and in Pskov, and since 2019 also from Vysotsk (Leningrad Region), which are owned by Criogaz Group companies. In 2018, LNG was supplied to Finland, Poland, Estonia, Czechia, Lithuania, Latvia and Kazakhstan. The total export sales of small-capacity LNG increased from 21,700 tons in 2015 to 47,300 tons in 2018.
Plans for International Gas Supplies
In the medium term, Russian gas supply to the foreign markets will increase. China is going to become one of the most attractive new markets for Gazprom, where gas consumption growth rate reached 18% in 2018. Construction of gas transportation infrastructure in the East of Russia would enable Gazprom to become one of the leading gas suppliers to China and reach a sustainable position at the fastest growing gas market in the world.
Questions from stakeholders
Question from business partners
Do you still have plans to develop alternative gas sale instruments?
The role of trading platforms as pricing benchmark becomes more pronounced at the European gas market.
Since the end of 2017, Gazprom Export LLC is engaged in gas trading at the appropriate platforms. In August 2018, the Company launched its proprietary electronic trading platform (ETP) to sell gas both under standardized market conditions and under own contractual terms and conditions. The ETP allows to propose gas supply contracts at any potential hand-over points (both at the trading facilities and at the illiquid border points) with different supply terms starting with 1 day. Therefore, Gazprom Export LLC intends to use the ETP for operational gas placement at the market, as well as offer to the customers more competitive products taking into account their individual requirements.
In 2018, the total gas sales through the said channels amounted to more than 5.5 bcm.
Natural gas is the most efficient, environmentally friendly and safe fuel. For more information on natural gas as efficient motor fuel see here
Government relations aimed at setting up the environment for NGV fuel market development
Gazprom collaborates actively with the federal executive agencies in order to set up the environment required for NGV fuel market development in the Russian Federation. Special attention is paid to improvement and updating of the regulatory framework:
- The Customs Union Technical Regulation TR CU 018/2011 On Safety of Wheeled Vehicles was updated;
- The Eurasian Economic Union Technical Regulation On Safety of Combustible Natural Gas Prepared for Transportation and/or Use (TR EEU 046/2018) was approved;
- The Strategy of Automotive Industry Development in the Russian Federation until 2025, approved by Order of the Government of the Russian Federation No. 831-r dated April 28, 2018, was supplemented with information on the current status of gas refilling and service infrastructure for natural gas vehicles, as well as of the need to provide priority support to gas-engine vehicles production and demand for them.
At the end of 2018, the concept of the comprehensive strategic document NGV Fuel Market Development Subprogram of the Energy Sector Development State Program of the Russian Federation was approved as a result of collaboration with the federal executive authorities. The document would ensure development of gas refilling infrastructure and would facilitate development of the optimal environment for increasing the number of gas-engine vehicles in Russia, reducing the customer motor fuel expenses and mitigating adverse impact of transport upon atmospheric air.
In order to create the environment for the Gazprom Group’s business development as related to NGV fuel market development, the following support measures were developed in 2018 and earlier in collaboration with the regional authorities:
- Seven agreements on cooperation aimed at NGV fuel market development were concluded with the constituent entities of the Russian Federation (in 2013–2018, such agreements were concluded with 60 constituent entities of the Russian Federation);
- NGV Fuel Market Development Task Forces were established in 47 constituent entities of the Russian Federation, which are currently in operation, in addition, task forces established under the Presidential Envoys are operating in Volga and Urals Federal Districts;
- The regional state programs (subprograms) aimed at NGV fuel market development were approved in 26 constituent entities of the Russian Federation, stipulating the target indicators for the number of vehicles purchased and converted to CNG;
- Standalone activities aimed at incentivizing natural gas use as engine fuel stipulated by the program-level documents are carried out in 22 constituent entities of the Russian Federation;
- Zero or reduced transport tax rates are applied for NGVs in 20 regions, including the Chelyabinsk and Leningrad Regions that implemented that measure in 2018;
- In the regions where compressed natural gas sales are actively developed, the regional authorities add to the tender documents the requirements on mandatory use of gas-engine buses during the public tenders for servicing social routes. Such tender procedures were enacted in 36 constituent entities of the Russian Federation;
- In the Sakhalin Region, the program of state support of conversion was adopted; since 2018 over 420 vehicles have been converted to NGV fuel;
- The Government of the Sakhalin Region granted subsidies from the regional budget (in the amount of 70%) to investment projects of small-scale LNG production, construction of LNG receipt, storage and regasification systems, development of NGV refueling infrastructure and transportation of compressed and liquefied natural gas;
- In 8 regions, projects for the construction of CNG filling stations have the status of Large-scale/Strategic Regional Projects (Samara Region, Volgograd Region, Udmurt Republic, Moscow, St. Petersburg, Kaliningrad Region, Republic of Mordovia, Republic of Tatarstan).
NGV Fuel Market Development in the Russian Federation
The Gazprom Group implements the following programs aimed at NGV fuel market development:
- The Program for NGV Refill Infrastructure Development at Sites of Subsidiaries in 2017–2019;
- The Program for Small-scale LNG Production and Use Development.
Those programs stipulate a set of activities aimed at Gazprom vehicles conversion to natural gas and installation of the NGV refilling modules at the sites of the Group enterprises. They define the list of gas distribution stations (GDS) and liquefaction technologies having the best potential for LNG production, as well as stipulate construction of the new sales infrastructure facilities — stationary cryogenic refill stations (cryo-GS) and mobile LNG fuel tankers.
In the Russian Federation, there are 406 NGV refill facilities: 390 CNG filling stations and 16 sites for mobile gas fuel tankers (MGFT), 309 of them are owned by Gazprom (293 CNG filling stations and 16 MGFT sites). The total capacity of the Company NGV refueling network is 2.2 bcm of gas per year.
The actual sales of CNG from the Group’s CNG filling stations amounted to 598.2 mcm in 2018, which is 13.7% more than in 2017.
Gazprom Gazomotornoye Toplivo LLC performance indicators at the NGV fuel market of the Russian Federation(1), 2015–2018
|Share of the NGV fuel market of the Russian Federation(2), %||1.2||16.6||24.2||22.3|
|Investments in construction and upgrading of gas fuel infrastructure facilities: CNG filling stations, МGS, NGV maintenance stations, RUB million||2,938.08||3,748.13||4,057.11||4,643.82|
NGV fuel sales,|
|CNG, RUB million||57.1||975.7||1 557.1||2 511.4|
|LNG, thousand tons||14.3||13.4||19.7||22.4|
|LNG, RUB million||248.3||229.3||383.4||482.7|
|Number of operating and built CNG filling stations, units||1||49||55||78|
|Number of regions with active CNG station network, units||1||22||27||35|
(1) Gazprom Gazomotornoye Toplivo LLC is not included in the IFRS consolidated statements of PJSC Gazprom. Information on the operations of Gazprom Gazomotornoye Toplivo LLC is included in the Report as NGV fuel market development topic was deemed material.
(2) Share of Gazprom Gazomotornoye Toplivo LLC CNG sales in the total sales across Russia.
Gazprom gas refill infrastructure is developed in 17 priority regions. In 2018, implementation of the pilot projects aimed at accelerated development of the regional NGV fuel markets was started. The projects imply construction of the maximum number of CNG filling stations for broader coverage of the customers.
LNG also has significant potential as engine fuel. It is used in motor vehicles in case of long-haul cargo and passenger transportation, as well as in water and railway transport, in mining and agriculture. In 2018, the sales of small-scale LNG produced by the Gazprom Group and Gazprom Gazomotornoye Toplivo LLC amounted to 30,500 tons.
Gazprom continues developing of NGV market abroad: in Germany, Czechia and Poland through 100% subsidiary Gazprom NGV Europe GmbH, in Serbia through NIS company (part of Gazprom Neft Group). As of December 2018, there were 70 Gazprom Group’s CNG filling stations and cryo-GS in Europe. The companies’ CNG and LNG sales via the Group own stations reached 12.9 mcm in 2018, which is 5% more than in 2017.
The Group also sells CNG via CNG filling stations in the FSU states: Armenia, Belarus, Kyrgyzstan.
In 2018, the resolution was passed to approve the pilot project for construction of a small-scale LNG production plant in Vietnam. The project is implemented by PVGAZPROM Natural Gas for Vehicles JV established by Gazprom EP International B.V., Gazprom Gazomotornoye Toplivo LLC and PETROVIETNAM GAS.
NGV Market Development Outlook
Different formats of the points of sale are used in order to expand the refill stations network and increase NGV fuel use: CNG filling stations and cryo-GS, MGFT, etc. The total number of NGV fuel infrastructure facilities shall reach 500 by the end of 2023.
The regional markets in Russia would be linked by NGV fuel corridors using gas refill infrastructure to sell liquefied and compressed natural gas. It is going to be focused along the key federal highways with significant traffic, as well as along the Russian section of Europe — China international transportation route.
The international NGV fuel markets growth rates are expected to accelerate past 2040, as certain countries — India, China, France, Germany, Netherlands, UK, Norway — have already announced the prohibition on sale of diesel and gasoline engines in 2025–2040. The additional market potential for natural gas as an engine fuel will be 100–250 bcm, including 30–75 bcm accounted for by the share of the Russian Federation(1).
Natural gas vehicle fuel is safer for the environment and more profitable for customers
Oleg Melekhin, Director General of Gazprom Gazomotornoye Toplivo LLC
What do you think about the current development of NGV fuel market in Russia?
We gradually overcome the factors hampering the NGV fuel market development in Russia. That is driven by environmental and economic advantages of methane compared to conventional fuels. We would all breath cleaner air, but the price is another important advantage: in 2018, the average CNG price in was RUB 14.2 per cubic meter in Russia, which equals 32% of the average diesel fuel price and 65% of LPG price. And from consumption point of view, 1 cubic meter of natural gas is equivalent to 1 litre of gasoline.
Natural gas generates tangible economic benefits. For example, in cargo or passenger transportation. If about 10 cubic meters of methane are required to travel 100 kilometers, the cost per kilometer is RUB 1.6, and if gasoline is used 1 kilometer out of 100 costs more than RUB 4.2.
Due to Gazprom comprehensive work, sales of natural gas as engine fuel increase annually by 8–13%. In general, methane has good chances to gain a significant market share, however, that requires an extensive gas refilling infrastructure and consistent increase of the number of natural gas vehicles. Gazprom Gazomotornoye Toplivo LLC continues working on that and collaborates with all constituent entities of the Russian Federation. By the end of 2020, Gazprom’s CNG station network will consist of more than 400 facilities.
What are the specific plans of Gazprom Gazomotornoye Toplivo LLC for facilitating the NGV fuel market development in Russia?
Our objective is to expand the NGV stations network to make sure that vehicles could be filled with CNG every 250 km and with LNG every 400 km. In order to achieve that, construction of CNG filling stations and cryo-GS is in progress, MGFTs are operated, CNG modules are installed at the operating GSs and industrial sites of PJSC Gazprom subsidiaries.
The Company also collaborates with automakers to expand the range and increase production of natural gas vehicles. Cooperation agreements were signed with many Russian and foreign manufacturers, including AvtoVAZ, KAMAZ, GAZ Group, IVECO, Scania, etc.
What should customers use as engine fuel: CNG or LNG?
Both of them are natural gas. The only difference is the method used to reduce its volume. In case of LNG, more complex equipment is required, and it costs a bit more, but ultimately gas has smaller volume increasing the distance run on one fill. This type of engine fuel has significant potential in maritime shipping and is an alternative to diesel fuel for heavy-duty trucks.
How safe are cars equipped with CNG systems?
If gas equipment is installed by professionals at the official centres, or if the purchased car was manufactured accordingly, there are no reasons for concerns. It is only necessary to adhere to the safety rules and perform timely checks of the gas cylinder to make sure it is in good order. The walls of the gas cylinder bear the working pressure of 200 atmospheres. This makes explosion impossible even in case of a major accident. In addition, the gas cylinder fixtures are equipped with automatic devices preventing gas leaks in case of damage of the device delivering gas to the engine.