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  Tuesday, December 10, 2019
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Gazprom began construction on the North-European natural gas pipeline
Gazprom, Russia's natural gas monopoly, began construction on the North-European natural gas pipeline (NEG) and plans to complete the first 100km through the Boksitogorsky area in the Leningrad region in six months, the daily Biznes reported. With an estimated 55-million-metric-ton annual capacity, Gazprom will open a direct under sea route for Russian gas exports to Europe, which would allow it more flexible pricing and avoid long-term and fixed-priced intermediary contracts, the article said. The article cites Arif Zeynalov, an analyst within the Zurich Capital Management investment company, as saying that Gazprom's Western partners, including E.ON and BASF (both German), currently resell natural gas at a higher interest margin. Gazprom is seeking independent operation in Europe under short-term contracts. It recently bought underground storage facilities in Britain, along with leasing storage facilities in several European countries, since it believes that NEG construction would guarantee increasing gas supply. Gazprom intends to complete construction on the project in 2008. However, project success depends on the development of the South Russian gas field in the Yamal Peninsula in West Siberia, with its estimated 688-billion-cubic-meter natural gas deposits and 35-45-billion-cubic-meter annual production capacity. The gas field is going to be the main supplier of gas for the North European gas pipeline. The company has already conducted exploration drilling in the area. The NEG project is estimated at $7.8 billion, of which $5.7 billion is to be allocated for the development of the South Russian natural gas field. Experts believe Gazprom will most probably try to finance construction by issuing loans. It will also lobby for help from one of its assets, Gazprombank, though it has yet to attract more investment into gas field development, the article said. Gazprom has recently stepped up efforts to enter the Sakhalin-2 consortium, owned by British oil company Shell, having proposed in return a stake in the Shtokmanovskoye field on the Barents Sea shelf, whose reserves are estimated higher than those of the South Russian natural gas field, but its operation would begin much later. Shell is therefore unlikely to wait and will opt to join the project, the article said.
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