LUKOIL and Norilsk Nickel are creating a large oil and gas cluster at five sites in the Krasnoyarsk Territory and the Yamal-Nenets Autonomous Okrug

As Kommersant learned, LUKOIL (MOEX: LKOH) and Norilsk Nickel (MOEX: GMKN) are creating a large oil and gas cluster, which already includes five areas in the Krasnoyarsk Territory and the Yamalo-Nenets Autonomous Okrug. Currently, the resource base of the project is about 300 billion cubic meters of gas and 70 million tons of oil. For several years now, Norilsk Nickel has been looking for opportunities to increase its gas resource base to supply its new projects in the Norilsk industrial region. LUKOIL is interested in replenishing its oil resource base, given that it is extremely difficult for the company to obtain new large areas.

“Kommersant” became aware of the areas that will be included in the large oil and gas cluster created within the framework of the joint venture of LUKOIL and Norilsk Nickel – Vareineftegaz. In September, this oil and gas company was established in the Yamalo-Nenets Autonomous Okrug, the shares between the partners were divided in half. Thus, according to Kommersant’s information, LUKOIL contributed Severo-Vareisky section-1 to Vareineftegaz, and Severo-Vareisky-2 and Severo-Vareisky-3 to Norilsk Nickel. These areas are located in the Yamal-Nenets Autonomous Okrug. Their total resources in categories D1+D2 are 68 million tons of oil and condensate and 323 billion cubic meters of gas. In addition, LUKOIL will contribute to Vareineftegaz the areas in Taimyr (Krasnoyarsk Territory) – Yuzhno-Payutsky and Yuzhno-Ushakovsky with total resources of 8 million tons of oil and 182 billion cubic meters. The Ministry of Natural Resources told Kommersant that on December 5 these licenses were reissued to Vareineftegaz.

LUKOIL did not answer Kommersant; Norilsk Nickel declined to comment.

LUKOIL and Norilsk Nickel fought for all these undeveloped areas at Rosnedra auctions. Thus, the license for the Severo-Vareisky-1 site went to LUKOIL for almost 45 million rubles, and Norilsk Nickel paid 54 million rubles for the other two neighboring sites. Yuzhno-Payutsky and Yuzhno-Ushakovsky cost LUKOIL 50 million rubles. Norilsk Nickel also tried to fight with Rosneft in 2020 for the Deryabinsky and Turkovsky blocks in the Krasnoyarsk Territory, but the mining and metallurgical company was forced to cede them, and the oil company pledged to provide the missing volumes of gas to Norilsk Nickel in the future. Now these areas are included in the Vostok Oil project. Kommersant’s interlocutors also claim that the joint venture could be supplemented by the Laduketsky section of LUKOIL in the Krasnoyarsk Territory.

Vareineftegaz is a rare example of partnership between companies from different industries. Previously, LUKOIL was part of joint ventures for the development of fields in Russia with Gazprom and its subsidiary Gazprom Neft. Kommersant’s interlocutors explain the essence of the partnership by saying that Norilsk Nickel is interested in providing gas to the Norilsk industrial region, while LUKOIL, in conditions of extremely low chances of acquiring large oil fields and the depletion of existing assets, is looking for ways to increase the resource base. Norilsk Nickel is already producing gas at fields in the Krasnoyarsk Territory with reserves of 250 billion cubic meters of gas and 5 million tons of condensate – Pelyatkinskoye, Yuzhno-Soleninsky, Severo-Soleninsky, Messoyakha. At the end of last year, they produced 2.8 billion cubic meters of gas and about 100 thousand tons of condensate, which are used as fuel for generation. Norilsk Nickel owns three thermal power plants and two hydroelectric power plants with a total capacity of 2.2 GW.

Norilsk Nickel is implementing large energy-intensive projects in Taimyr in the form of the Sulfur Project, and in Norilsk and Dudinka it is building a number of gasification facilities, notes Boris Krasnozhenov from Alfa Bank. Therefore, in the future the company will probably need to increase gas production.

In 2020, Norilsk Nickel, in a letter to the Ministry of Energy (Kommersant has a copy), reported that when the company’s current fields reach an annual production level of 8 billion cubic meters, the duration of constant production will be four years, and a shortage of gas supplies in Norilsk will arise in 2038 year. The company wrote that in the future, until 2030, it is planned to increase gas consumption by enterprises of the Norilsk industrial region to 4.5 billion cubic meters of gas.

Dmitry Kozlov, Evgeny Zainullin