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Russia Boosts Domestic Oil, Gas Pipeline Capacity

Natgas installation

Russia increased its domestic pipeline capacity by launching a gas pipeline and two oil pipelines on Wednesday.

Gazprom’s Bovanenkovo-Ukhta 2 gas pipeline has the capacity to carry 263 million cubic meters of gas daily and from Ukhta will connect to trunklines carrying gas to northern Europe. The oil pipelines which Russia launched today are the Kuyumba-Taishet and Zapolyarye-Purpe lines.

The new oil pipelines were built by Transneft. Bovanenkovo-Ukhta 2 is carrying gas from the Bovanenkovskoye field, the largest field in the Yamal Peninsula. Explored and preliminary estimated gas reserves at the field are 4.9 trillion cubic meters, Gazprom’s website says.

The launch of the three pipelines will boost Russia’s oil and gas capacities and help regions develop, President Vladimir Putin said in a video conference launching the start of pipeline operations.

Russia needs to begin producing oil and gas from new promising fields, continue pipeline construction, and focus on high-technology refining and processing facilities, Putin said.

A couple of months ago, Alexander Machulin, director general at Russian gas equipment repair company Promgazenergoservis LLC, said that 60 percent of all gas pipelines operating in Russia were between 40 and 50 years old, flagging concerns over the deterioration of the gas infrastructure in the country.

Related: $25 Trillion Investment Needed To Meet Future Oil Demand

At the end of last year, Finance Minister Anton Siluanov said that under the three-year budget plan, Russia should break even in 2019, as long as oil prices remain at between $40 and $45. The 2017 budget even stipulated an oil price of $40 a barrel, with $45 per barrel earmarked for 2019.

Russia’s crude oil production increased by 2.5 percent last year, reaching a post-Soviet record in the fourth quarter. Russia has pledged to gradually cut 300,000 bpd of its output in the first six months this year under its agreement with OPEC to help restore oil market balance.

After the deal with OPEC expires in June, Russia’s crude output is seen reaching a new post-Soviet high of 11.05 mln bpd in 2017, according to a Reuters poll of analysts and consultants.

By Tsvetana Paraskova for Oilprice.com

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