Russia private investor beats Novatek in race for Yamal gas blocks

An ambitious Russian investor has edged out the country’s largest independent gas producer, Novatek, in a race for two large blocks on West Siberia’s Yamal Peninsula, with exploration and development licences for the tracts auctioned earlier on Tuesday.

According to the Russian Natural Resources Ministry, Moscow-registered Yamal Sever offered to pay over 860 million rubles ($11.5 million) for the South Seyakhinsky block and 212 million rubles for the South Nilivoysky block.

The two blocks occupy about 3200 square kilometres and lie next to several large gas tracts operated by regional subsidiaries of Novatek.

The ministry said Novatek participated in the auctions through two of its subsidiaries, Yukharovneftegaz and Obsky GCC.

Another Russian private investor, Alexei Chulkin, also took part via UDS Neft, a company based in the Udmurtia region.

Yamal Sever is affiliated to Russia’s former energy minister Igor Yusufov, who worked for oil producer Rosneft and gas giant Gazprom before founding his investment house, Fond Energia, in 2008.

Exploration plans

Fond Energia is exploring two blocks — Nilivoysky and Malotambeysky — through its other Russian affiliate, Novokhim,

These two tracts are located next to the two newly acquired assets in the northeast of the Yamal Peninsula, which already hosts Novatek-led Yamal liquefied natural gas development and Gazprom-led Tambey project.

Novokhim executive director Yegor Bogdanov told Upstream that the acquisition of the two blocks has long been seen as important to the company’s long-term growth plan on the Yamal Peninsula.

Novokhim is currently preparing technical and cost assessment documentation to spud its first wildcat on the Nilivoysky tract — which borders South Nilivoysky — after the company received interpretation results from a recent 3D seismic programme, completed on the block by contractor Gazprom Nedra.

For the Malotambeysky area, Novokhim is currently expecting results of the re-interpretation of previously collected 2D seismic data before moving forward with acquiring 3D seismic data and selecting locations for wildcats, Bogdanov said.

The operator anticipates significant upside in reserve estimates in Jurassic and Achimov formations for this block, following large gas and condensate discoveries at several tracts in the northeast of the Yamal Peninsula explored and developed by Novatek and Gazprom.

Investments backed by cash flow

Bogdanov said the flow of investments into the Yamal exploration programme is supported by the company’s producing Yargeo asset in West Siberia’s Yamal-Nenets region.

Yargeo is developing the Yarudeyskoye field and is a joint venture in which Novatek holds a 51% interest and Fond Energia has the remaining 49%.

According to the Russian Energy Ministry data, Yargeo reported oil production of 17.6 million barrels and gas output of over 2.6 billion cubic metres between January and November last year.

Yamal Sever also bid for a third large block in the Yamal auction, West Malyginsky, but the licence for the asset, covering more than 3800 square kilometres in the west of the peninsula, went to Gazprom.

The gas giant offered almost 1.35 billion rubles for the tract, also beating competition from Novatek and UDS Neft, according to the Natural Resources Ministry.