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EBRD and GazProm release study results of Russian Gas Supply System
Results of the first study carried out on Russia's entire gas supply system, built and operated by RAO GazProm over the last 20 years, have been released today. GazProm and the European Bank for Reconstruction and Development (EBRD) announced the results during a meeting with the study’s donors (Canada, France, Netherlands, Norway, UK and the USA) in London.
Ron Freeman, First Vice President of the EBRD, said: “Russia, with its vast proven gas reserves now estimated at 40 per cent of the world’s total, has seen an unprecedented development of gas extraction and distribution. The findings of this study, which was made possible with the assistance of donor funds, will help ensure that these activities are coordinated and investment is targeted to critical areas.”
Vladimir Rezunenko, a board member of GazProm and Chairman of the Study Management Committee, said: “The study’s conclusions will help GazProm to present itself as a major and reliable gas producer and delivery partner. We are firmly committed to improving those areas identified by the report as needing immediate investment and are indebted to the donor countries for their support in this process.”
The study’s main findings show the remarkable scale of the system. Over the past 20 years, a total of more than 140,000km of main pipelines and 250 compressor station complexes have been built. The system currently produces and transports more than 600 billion cubic metres (BCM) annually, 240 BCM of which is for export, half of this going to western Europe.
Despite an overall high reliability in supply, the system is vulnerable to hazards caused by a lack of investment and monitoring procedures and the physical condition of the pipeline. Corrosion, instability caused by difficult terrain and climate, and operating practices are all areas which have been earmarked by the study for improvement. GazProm is already working on most of these areas to overcome existing problems.
The proposed investment programme, if implemented by GazProm, would require total investments of more than US$ 3 billion, or US$ 500 million per year until year 2000. The EBRD has already expressed its intention to consider financing projects in areas where it can add value and catalyse additional investment, together with other international and Russian financing institutions.
The study was completed by a group of Russian and Western specialists headed by IKEM Ltd. Companies included: NovaGas International and J. Lacey of Canada; BEICIP-FRANLAB and Sofregas of France; Gasunie Engineering of the Netherlands; a consortium lead by Det Norske Veritas of Norway; C. Hardcastle & Co, Ernst & Young and S.G. Warburg of the UK; and Fluor Daniel Williams Brothers of the USA.
Russian Unified Gas Supply Study Findings
The study’s main objectives were threefold: first to provide an independent external assessment of the overall reliability of the supply system and its ability to continue supplying gas to domestic and foreign clients; second, for Western gas specialists and operators to identify vulnerable areas which need to be improved to guarantee a reliable supply; and third, with particular interest to the EBRD, the study was to identify and develop bankable investment projects that fulfil these objectives.
The study’s main conclusions are:
1. The system has been built into a robust gas transport network, taking into account the severe climatic and operational constraints, and allowing for flexibility in the operational regime. Development of such a vast system, satisfying a fast-growing demand, does not exist anywhere else in the world.
2. Historically, production targets were set centrally and do not necessarily follow Western investment and financing practices but are based on appropriate technical standards.
3. The system has been able to provide an almost uninterrupted supply over the past two decades.
4. Due to less emphasis on economic and financial performance, the system has not always been run to Western standards of optimal efficiency.
5. Some of the major hazards identified include:
· increased corrosion problems due to inadequate pipe coating, inspection routines and cathodic protection as well as a lack of insulating joints;
· deficiencies in assuring reliability of major river crossings (flood plains up to 30km wide), pipeline corridor intersections and slope stability in mountainous areas;
· inefficiencies of compressor workshops along some corridors;
· unnecessary venting and gas leaks due to pipe ruptures, leaking valves and pipeline repairs, which have adverse economic and environmental consequences;
· need to improve centralised technical databases and information systems;
· environmental standards need to be more stringent to meet Western levels.
GazProm is already working on several of these areas and the EBRD is committed to supporting GazProm’s efforts in increasing the reliability and efficiency of the EGS system. The study has identified and prepared a number of immediate and longer-term investments that would contribute to system efficiency and reliability. These include mobile compressor stations, improved metering stations, valve replacement, pipeline inspection programmes, eliminating bottlenecks in pipeline corridors, improving coating lines, etc.
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