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Russian gas monopoly capitalizing on growing Chinese market
by Daniel J. Graeber
Moscow (UPI) May 21, 2013

Gazprom's oil division signs three-year deal with Russian rig provider
Moscow (UPI) May 21, 2013 - Gazprom Neft, the oil arm of gas giant Gazprom, said Wednesday it signed an agreement with Eurasia Drilling Co. for onshore and offshore work in Russia.

Eurasia Drilling Co., the largest oil services provider in Russia, will take on as much as 30 percent of all the drilling operations carried out by Gazprom Neft and its subsidiaries.

"Long-term planning is essential to effective field development and bringing new reserves into production," Gazprom Neft Deputy Chief Executive Officer Vadim Yakovlev said in a statement. "This agreement with EDC guarantees that our plans will be supported by the production capacity required."

EDC said the deal, retroactive to January, calls for rigs and services in Russian territory. No value for the contract was offered by either side.

"The scope and pricing of the work will be adjustable, with the consent of both parties, in line with changing market conditions," Gazprom Neft said.

Gazprom Neft last week said hydrocarbon production during the first quarter of 2014 was 116.75 million barrels of oil equivalent, a 4.5 percent increase from the same time last year. The company attributed the increase to deploying new technology at mature fields and production growth from its assets in the Orenbrug region and the Yuzhno-Priobskoye fields.

Russia will send natural gas to China as early as 2018, with initial volumes of 1.3 trillion cubic feet per year, Russia's energy minister said Wednesday.

Energy Minister Alexander Novak confirmed from Moscow a bilateral deal between Gazprom and China National Petroleum was signed in Beijing in the presence of Russian President Vladimir Putin and Chinese President Xi Jinping.

First deliveries from a 30-year contract valued at $400 million would start with the delivery of 1.3 trillion cubic feet through a Russian gas pipeline to China as early as 2018, the minister said.

CNPC Vice President Wang Dongjin added a sales contract for the purchase of liquefied natural gas from a project on the Far North peninsula of Yamal was signed with Russian energy company Novatek.

Wang met in Beijing with Gazprom Chairman Alexei Miller to discuss a future gas relationship. Miller said the deal with CNPC is just a start.

Doubts surfaced Tuesday that the deal was held up over pricing concerns. Gazprom's Miller said at the time that "[both] sides are searching for a compromise."

Gazprom has sought entrance into the growing Asian market in an effort to diversify an asset base tied to a European economy still struggling to grow. Ongoing disputes over gas debt in Ukraine, which transports the bulk of Russian gas supplies to Europe, adds another layer of risk to Gazprom's consumer foundation.

Leonid Slutsky, the director of regional affairs in Russia's State Duma, told state news agency RIA Novosti the gas deal was one of many on the table for Putin during his visit.

"Sino-Russian cooperation is one of the centers of gravity of the world economic architecture of the 21st century," he said.


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