The world will face oil supply shortages sooner than expected as producers scale back investment due to the financial crisis, the head of Russian energy giant Gazprom said on Wednesday, Reuters reported.
Gazprom Chief Executive Alexei Miller also pledged to produce as much gas as required by customers in 2009 and said the company could partner German chemical group BASF to develop gas refining projects in eastern Siberia.
Miller was speaking to reporters at the inauguration of the Achimgaz project just south of the Arctic Circle, where Gazprom and BASF unit Wintershall plan to produce 1 billion cubic metres of gas in 2009, the first full year of its operation.
"We have extensive plans on gas refining and petrochemical projects in East Siberia," Miller said at the ceremony. "This will become the main direction of our cooperation," he said, adding Gazprom and BASF were discussing joint projects there.
Russia holds the world`s largest gas reserves and is the second-largest oil exporter after Saudi Arabia. Oil production, however, is stagnating after a decade of growth as companies face heavy costs in developing remote, hard-to-access fields.
"Oil companies are beginning to underinvest in production due to the financial crisis," said Miller, whose firm also owns Russia`s fifth-largest oil producer, Gazprom Neft.
"This means a supply shortage will come much earlier."
Russia officially plans to increase oil production to 500-509 million tonnes by 2010 from 491.5 million tonnes last year, but output is expected to fall slightly in 2008.
In order to achieve this, leading producers such as Rosneft , LUKOIL and TNK-BP have lobbied for more tax breaks to encourage investment in eastern Siberia and the Arctic and replace depleted reserves further west.
East Siberia will also become a key area for gas production. Miller said Gazprom, Russia`s gas export monopoly and supplier of a quarter of Europe`s gas, had extensive plans to create a single system of production and transport in the vast region.
"We have presented this programme to BASF specialists and started serious dialogue on joint work on the plan," he said.
NEW FIELD
Achimgaz, a 50-50 joint venture between Gazprom and Germany`s Wintershall, said it would produce around 1 billion cubic metres (bcm) of gas and 350,000 tonnes of gas condensate in 2009.
Achimgaz is scheduled to produce 0.53 bcm of gas and 118,700 tonnes of gas condensate in 2008. Production began in mid-July.
When it reaches full capacity from 2010, it will produce 8.3 bcm of gas and 2.8 million tonnes of condensate per year.
BASF executives said they had already invested 300 million euros ($378.7 million) in Achimgaz and a further 700 million euros would be the minimum required to bring the field to full production.
Wintershall has provided advance funding for the project and Gazprom`s share of the development costs will come from revenues once gas starts to flow.
Gazprom and BASF are also partners in the much larger Yuzhno-Russkoye gas field in northwest Siberia, which is expected to feed the planned Nord Stream gas pipeline that will take Russian gas to Europe from late 2011.
BASF Chief Executive Juergen Hambrecht said production at Yuzhno-Russkoye would reach a plateau of 25 bcm a year in mid-2009. This would be two years ahead of the original schedule and six months earlier than previous statements had indicated.
Hans-Ulrich Engel, the BASF board member responsible for oil and gas, said he expected the first gas would flow into the Nord Stream pipeline from Oct. 1, 2011.
Russia officially forecasts gas output rising to 701-709 bcm by 2010 from 651 bcm last year, of which 264-269 bcm were exported. Miller said: "In 2009, we (Gazprom) will produce as much gas as customers need."
Gazprom also plans to increase export revenues by about a third this year to over $65 billion. But Miller said gas prices to Europe were certain to fall from fourth-quarter levels above $500 per 1,000 cubic metres as oil prices had fallen sharply.
Earlier this year, Miller said oil prices would soon reach $250 a barrel, just before they collapsed from their peak July levels. Crude is now trading at below $60 a barrel after topping $147 in July.
