Russia could try hand at shale gas production
MOSCOW. Nov 22 (Interfax) – The Russian Energy Ministry proposes taking the first steps towards developing the country’s shale gas resources, staring with licensing and incentives to produce this sort of gas.
The proposals are in a protocol resolution for a meeting to be chaired by Russian Prime Minister Dmitry Medvedev and planned for Thursday, but which has been put off indefinitely, Finmarket said.
The draft resolution would give the Natural Resources Ministry, Energy Ministry, Gazprom (RTS: GAZP) and Russian Geology (Rosgeologiya) until the end of 2014 to make a preliminary estimate of Russia’s share gas resources, taking the specifics of shale gas formations into consideration. The two ministries would draft proposals on ways to streamline licensing for shale gas deposits. These ministries as well as the Economic Development Ministry and Finance Ministry would draft proposals to stimulate shale gas production. The resources and energy ministries would draft proposals on categorizing shale gas as a separate mineral in the National Classifier of Mineral Resources and Subsoil Waters.
The resources and energy ministries, in conjunction with Gazprom (RTS: GAZP) and Rosneft (RTS: ROSN) and leading gas R&D institutes would draft proposals on the creation of a test ground for commercial methods to extract shale gas on a small-to-medium scale, and putting these methods into practice at the Bazhenov and other suites.
The Energy Ministry notes that Russia’s shale gas reserves and potential have not been explored in view of the fact that the country has considerable natural gas reserves to meet domestic and external needs. But Russian and foreign geologists believe Russia has significant shale gas potential. The Natural Resources Ministry says 12 deposits with overall ABC1+C2 reserves of 5.2 billion tonnes, 500 million tonnes of them non-commercial, have been listed on the state balance.
The cost of producing shale gas has fallen substantially in recent years in the North America and ranges from $130 to $260 per thousand cubic meters. The cost of production at one of the best shale plays in the United States is $80-115.
However “if the cost of producing shale gas in Russia proves to be as low as in the United States, it will still be higher than at most undeveloped conventional Russian gas fields. Russia has no shortage of natural gas resources at conventional fields and there is no economic rationale to develop unconventional forms of gas, so there are no premises for the active (commercial) development of unconventional sources of gas,” the Energy Ministry says.
Russia’s Gas Industry (Gazovaya Promyshlennost) journal this year published an article by Vladimir Yakushev of the Gazprom VNIIGAZ institute on the economics of unconventional gas production. He estimated the cost of lifting shale gas at between 2,400 and 5,400 rubles per thousand cubic meters in the Saratov region and the average cost at 3,900 cu m (the regulated gas price for the region being 3,360 rubles not including VAT). Yakushev’s conclusion was that that shale gas profitability would be “borderline” in the Russia market.