Putin Fast-Tracks $38 Billion Russian Eastward Gas Pipeline to Supply Growing Asian Markets

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Russian President Vladimir Putin is using all his political weight to fast-track a trunk pipeline project linking the Chayanda gas field in the Irkutsk region to the eastern port of Vladivostok. At a meeting on the Eastern Gas program, the president asked Alexei Miller, CEO of giant gas utility Gazprom (OTC:GZPFY) (Moscow, Russia), to ensure that work on the project begins as quickly as possible.

At the meeting, Miller said that the 3,200-kilometer pipeline would be completed by the end of 2017. The pipeline will involve an investment of $24.5 billion, and a further $13.7 billion would be invested in equipping and developing the Chayanda gas field. The pipeline will have a capacity of 1.2 trillion cubic meters (42.3 trillion cubic feet) of natural gas.

The project will begin with the development of the Chayanda field, followed by the second stage for work on the Kovykta field, and then the third stage at Krasnoyarsk. The pipeline's route will pass from Chayanda via Yakutia to Khabarovsk and Vladivostok. Gazprom is working with a Japanese partner to construct an liquefied natural gas (LNG) plant at Vladivostok to process the gas for export. The LNG plant, with a processing capacity of 10 million to 20 million tons, should be in operation by 2020.

The project will be a major element in forming a unified gas supply system throughout Russia. "It enables gas to be supplied from the Irkutsk gas production center to the west toward Krasnoyarsk, Novosibirsk and Omsk," Miller said. "Thus, we plan to link East Siberia with West Siberia. So we will have a unified gas system."

Putin's strategy in urging the $38 billion investment is to have a direct route to ship gas to resource-hungry Asian nations like China and Japan and to take advantage of the dramatic growth in demand for gas in the region. This would offset sluggish demand from its European customers.

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