Novatek Brings On Stream New Gas Field in West Siberia to Boost Cash Reserves

SEATTLE (Oil Monster): Russia's largest independent gas producer Novatek has commissioned a mid-sized gas condensate field in West Siberia that aims to increase the company’s domestic gas deliveries by more than 4% once the asset reaches plateau output.

Novatek on Wednesday said in a statement that it started ramping up production of natural gas and condensate at the North Chaselskoye field, aiming to increase the asset's annual output to 3 billion cubic metres of gas and some 750,000 barrels of condensate.

North Chaselskoye is located in the Yamal-Nenets region in West Siberia that hosts major legacy fields, operated by Novatek, Gazprom and other producers, which are key suppliers of gas to the Russian domestic market.

It is the first major greenfield in Novatek’s legacy area of operations in Yamal-Nenets that Novatek brought on stream after commissioning two gas deposits — Yevo-Yakhinskoye and Ust-Yamsoveyskoye — in the second quarter of 2022.

“The launch of the North Chaselskoye field will make a significant contribution to volumes of natural gas [that Novatek] supplies to the domestic market,” Novatek executive board chairman Leonid Mikhelson said.

Novatek acquired the field, discovered in 1987, via a 2019 asset swap with state-controlled producer Gazprom Neft, with the deposit being operated by Novatek’s regional gas producing subsidiary Yurkharovneftegaz.

North Chaselskoye was reported to hold recoverable reserves of more than 140 Bcm of gas and some 36 million barrels of condensate before the asset swap. In 2023, Novatek disclosed that it had conducted additional exploration work on the asset however the company provided no new reserves estimate.

Importance of Novatek's domestic gas business

Novatek executives have repeatedly said that the company’s gas production in the Yamal-Nenets region remains the backbone cash generator for its ambitious plans to build up liquefied natural gas developments that will export all of their output to international markets.

Russian laws prohibit Novatek from exporting gas produced at its legacy assets in West Siberia, stating that pipeline gas exports are the prerogative of Gazprom.

However, Novatek’s gas deliveries to domestic customers at reduced prices to compete with Gazprom’s supplies were reported to be highly profitable to the company because of the low production costs at the Novatek-controlled Yamal-Nenets fields. The company has used the cash accumulated from such sales to bankroll its ambitious LNG plans.

In 2021, Novatek reported domestic sales of about 65 Bcm of gas that was produced at its legacy Yamal-Nenets fields, with this volume having fluctuated insignificantly since 2014.

Domestic gas sales data for 2022 and 2023 are not available as Novatek stopped disclosing detailed operational breakdowns after the introduction of international sanctions against Russia and its corporations in response to Moscow's invasion of Ukraine.

Novatek only said that its total gas production in 2023 remained unchanged at just over 82 Bcm. However, this figure includes Novatek’s share of gas production in its flagship LNG export project, Yamal LNG, where it holds a 50% stake.

Novatek’s next large LNG development, Arctic LNG 2, was sanctioned by the US last November, prompting international shareholders in the project to suspend their participation.

The project since January has been unable to ship its maiden LNG cargo because sanctions are also impacting the specialised Arctic-class LNG carriers being built for this development.

Courtesy:  www.upstreamonline.com