The FINANCIAL — A $87 million long-term financing package put together by the EBRD will help an independent Russian company begin commercial utilisation of the Associated Petroleum Gas (APG) emerging from wells in one of the country’s main oil-producing regions after decades during which this gas was mainly burnt at the source.
Russia’s oil producers flare more APG than any other country in the world, causing massive greenhouse gas emissions, but the government has set a deadline of January 2012 by when such flaring will have to be cut by 95 percent. In terms of volume, Russia at present accounts for one third of all the associated gas flared globally.
This EBRD-funded project will use imported modern technology both to convert 360 million cubic metres a year of associated gas captured from two oil producers in the Khanty-Mansisk region of Western Siberia into liquid petroleum gas and other commercially usable fuels and to drive power stations. Without this project, the gas would otherwise be burnt.
According to EBRD, this will create a virtuous cycle combining increased energy efficiency with lower carbon emissions and delivering a business model for other small and medium-sized oilfields as they race to meet the government’s 2012 gas-flaring deadline.
The EBRD is advancing an eight-year “A” loan of $55 million for this project while a five-year “B” loan of $32 million has been syndicated to Italy’s Unicredit group. The EBRD will remain the lender of record for the full amount of $87 million.
The borrower, ZAO UgraGasProcessing, is fully-owned by OOO Monolit, the only independent Russian company employing new technologies to provide economically viable solutions for using associated gas. Monolit is, in turn, part of Roza Mira, a medium-sized independent Russian group trading oil products.
Part of the EBRD funding will finance the construction of a gas processing plant on the Zapadnoe-Salymskoe oil and gas field, jointly controlled by Royal Dutch Shell and Russia’s state-owned OAO Gazpromneft. The Salym field will deliver associated gas. In exchange, Monolit will supply Dry Stripped Gas for an existing gas turbine power plant.
The rest of the EBRD loan will fund a 44 MW gas piston power plant to be built at the Nizhne-Shapinskoe field. This will use Dry Stripped Gas produced by the gas processing plant in the Salym field pumped through a pipeline which will connect the two oilfields. Nizhne-Shapshinskoe field will also supply associated gas to the project.
The energy thus produced will be supplied under long-term off-take contracts to the production facilities of both Salym Petroleum and of Russneft, a private Russian oil group which operates the Nizhne-Shapinskoe field. The liquid petroleum gas will be off-taken by Roza Mira.
EBRD is assisting Monolit in the possibility of monetising the carbon credits generated by this project via the Joint Implementation (JI) mechanism under the Kyoto Protocol.
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