BASF and Gazprom boost natural gas production in Siberia with Achimgaz joint venture

* Joint project officially comes on stream
* Section 1A of the Achimov deposit has reserves of up to 200 billion cubic meters of natural gas
* Second joint project Yuzhno Russkoye already supplying more than 50 million cubic meters of natural gas daily

Novy Urengoy. Today, on Wednesday, 12 November 2008, BASF and Russia’s OAO Gazprom officially launched natural gas production at the joint venture ZAO Achimgaz in Siberia. The German-Russian joint venture produces natural gas and condensate from the Achimov Formation, from which it also gets its name, in the Urengoy deposit. Together with the natural gas field Yuzhno Russkoye, which was commissioned in 2007, Achimgaz is now the second joint natural gas production project by Gazprom and BASF in Siberia. Dr. Jürgen Hambrecht, Chairman of the Board of Executive Directors of BASF SE, and Alexei B. Miller, CEO of OAO Gazprom, opened a valve together to launch production at the deposit, which lies about 3,500 kilometers north-east of Moscow. The joint venture plans to recover up to 200 billion cubic meters of natural gas and 40 million tonnes of condensate from the Achimov Formation over a period of more than 40 years. The annual natural gas production target during the plateau phase is up to 7.5 billion cubic meters.

“Today, are we not only procuring natural gas from Russia and marketing it with Gazprom – we are now producing gas together in Russia, too. That means more supply security for Germany and all of Europe”, Dr. Jürgen Hambrecht declared at the official opening celebrations near the town of Novy Urengoy. The gas fields Achimgaz and Yuzhno Russkoye are also important symbolically, the BASF Chairman continued. “With these projects, for the first time a European company, namely BASF, is playing a central role in natural gas production in Siberia.”
“More than 15 years of successful cooperation, participation in major infrastructure projects and shared efforts in the delivery of gas to Europe bind Gazprom and BASF together. And today we are beginning a new chapter in the history of our partnership. Together with our German partners we are commencing gas production from the Achimov strata of the Urengoy deposit, which are far more complex to develop than the traditional Senoman and Valendis strata,” Alexei Miller said in his welcome address.
“In our view “Achimgaz” represents a model for the successful organization of shared business activities between Gazprom and its international partners for the production of hydrocarbons in Russia.”

ZAO Achimgaz was founded in July 2003 as a joint venture by Gazprom subsidiary OOO Gazprom dobytscha Urengoi and wholly owned BASF subsidiary Wintershall Holding AG with both partners holding equal shares. The aim of the joint venture was to develop the first section of the Achimov horizon of the Urengoy deposit – one of the largest natural gas fields in Russia. The Achimov reserves lie at a depth of 3,600 to 3,800 meters and have a much more complex structure than the overlying rock formations which have been producing so far. A gas treatment facility as well as three gas and condensate wells are currently in operation at section 1A of the Achimov Formation providing 1.5 million cubic meters of gas daily. In 2009 the field is set to produce almost a billion cubic meters of gas and about 300,000 tons of condensate.

The second joint natural gas production project, the natural gas field Yuzhno Russkoye, commissioned in 2007, has recoverable natural gas reserves of more than 600 billion cubic meters and is thus three times as big as Achimgaz. The field already supplies more than 50 million cubic meters of natural gas a day. “The development of the Yuzhno Russkoye field is going extremely well”, reported the Chairman of the Board of Executive Directors of BASF, Jürgen Hambrecht. “We will reach maximum production there of 25 billion cubic meters of gas per year by the middle of 2009 – two years earlier than originally planned" Over 100 production wells have already been drilled to develop Yuzhno Russkoye, and in the final phase of development this figure will be 142.

Gazprom and BASF/Wintershall: partners since 1990

At the moment Gazprom delivers around 40 billion cubic meters of natural gas a year to Germany. Based on this figure, the Yuzhno Russkoye and Achimgaz deposits alone could supply all Russian gas exports to Germany for another 20 years. Aside from these two major Russian production projects, BASF and Gazprom are also directly involved in the European natural gas supply. For instance, the two partners are planning to make additional investments worth several billion euros in the European natural gas infrastructure in the coming years. Most of the planned investments are earmarked for the construction of the Nord Stream Baltic Sea pipeline as well as the expansion of the German transport system and the construction of new natural gas storage facilities in Europe. Two natural gas pipelines on the German mainland are also planned for the onward transport the Russian gas arriving via the planned Nord Stream Baltic Sea pipeline: the OPAL (Ostsee-Pipeline-Anbindungs-Leitung – Baltic Sea pipeline link), which is to transport gas from the Baltic Sea coast south to the German-Czech border, and the NEL (Norddeutsche Erdgas-Leitung – Northern German gas link), which will transport gas to the West. Following commissioning in 2011, once the pipeline has been completed, up to 55 billion cubic meters of natural gas are set to flow from Russia to Germany via the Nord Stream pipeline.

Gazprom and BASF subsidiary Wintershall have already been active in natural gas sales and trading in Germany and other European countries via joint ventures (WINGAS, WIEH and WIEE) since 1990 and have invested around three billion euros to date in the construction and expansion of a pipeline infrastructure and the construction of natural gas storage facilities. Furthermore, a declaration of intent was recently signed to extend the existing primary supply agreement to 2043 ahead of schedule. This guarantees the natural gas trading companies WINGAS, WIEH and WIEE more than 800 billion cubic meters of natural gas for Europe over the next 35 years. To put this into context, this volume is enough to provide all German households with the “blue fuel” for 25 years. Russian natural gas is becoming increasingly important for Central and Western Europe because of falling production from the North Sea and increasing demand.

BASF is the world’s leading chemical company: The Chemical Company. Its portfolio ranges from oil and gas to chemicals, plastics, performance products, agricultural products and fine chemicals. As a reliable partner BASF helps its customers in virtually all industries to be more successful. With its high-value products and intelligent solutions, BASF plays an important role in finding answers to global challenges such as climate protection, energy efficiency, nutrition and mobility. BASF has more than 95,000 employees and posted sales of almost €58 billion in 2007. BASF shares are traded on the stock exchanges in Frankfurt (BAS), London (BFA) and Zurich (AN). Further information on BASF is available on the Internet at www.basf.com

Wintershall, based in Kassel, Germany, is a wholly-owned subsidiary of BASF SE in Ludwigshafen. The company has been active in the exploration and production of crude oil and natural gas for over 75 years. Wintershall deliberately focuses on selected core regions, where the company has built up a high level of regional and technological expertise. These are Europe, North Africa, South America, as well as Russia and the Caspian Sea region. Today, the company is the largest German producer of crude oil and natural gas, and with its subsidiary, WINGAS, it is also an important gas supplier on the German and European market. Further information on Wintershall is available on the Internet at www.wintershall.com

OAO Gazprom is the world’s leading natural gas company specializing in the exploration, production, transport, storage, processing and marketing of natural gas and other hydrocarbons. Gazprom’s gas reserves are estimated at 29 TCM, i.e. 60% of Russia’s and 17% of the world’s gas reserves. Gazprom is responsible for around 90% of Russian and 20% of global natural gas production. Gazprom has a 25% share of gas supplies on the European market, a 70% share on the Russian market and exports to 32 countries. Further information is available on the Internet at www.gazprom.com