Surgutneftegaz finds pipeline rules stifling to gas output

Surgutneftegaz, Russia's fourth-largest oil producer, said it cannot double natural gas pumping as it would like to because Gazprom, the country's gas pipeline monopoly, has set tariffs too high and made access difficult.
Surgutneftegaz plans to pump 14.5 bn cm of gas this year, up from 13.9 bn cm last year. The company could raise production to 30 bn cm, "but it doesn't make sense," Surgutneftegaz CEO Vladimir Bogdanov said in Moscow.
"If we had access to Gazprom's system and fair tariffs, we could boost production in a short time," Bogdanov said. "We don't need [to extract more] as we now meet demand" from local generators and Surgutneftegaz's gas refinery, which is located close to the company's fields.

Surgutneftegaz plans to bid for Unified Energy Systems' Siberia-based power generators as Russia breaks up UES, allowing the oil producer to increase profit margins on gas supplies to the utility, which burns the fuel to make electricity. Surgutneftegaz also is talking to Mitsubishi, Mitsui & Co. and Itochu, Japan's three largest trading companies, about building an $ 800 mm Siberian polyethylene plant to boost use of its gas.
"Shipment tariffs are set by the government, after we submit information on costs, and transport fees currently don't cover all the costs," said Sergei Kupriyanov, a spokesman at Gazprom. "We are facilitating a reform at the company to separate financial flows from production and shipment businesses to make them more transparent."

Gazprom said last December that it had granted permits in response to more than 50 % of the 210 requests submitted by outside gas producers seeking to ship the fuel through Gazprom's pipelines as of Dec. 11. The monopoly had planned to transport as much as 120 bn cm of gas this year that will be produced by outside clients. Surgutneftegaz supplies about two-thirds of its gas output to two local power generators, based in Surgutneftegaz, in west Siberia, which sell energy to the oil company to run its pumps and electric motors.
"We are interested in these units as we are the main gas supplier," Bogdanov said. Surgutneftegaz plans to bid for the utilities "if they are offered at an auction for cash with clear and understandable terms."

UES may this month decide how to sell wholesale generation companies that are being created as the government splits up the company to create competition and secure investments for modernization.
"It makes sense to secure cheaper energy supplies bearing in mind that Surgutneftegaz plans to build the polyethylene plant, which needs a lot of power," said Dmitry Lukashov, an analyst at Aton brokerage in Moscow. "But it will depend on the price for the generators," he said.

Electricity charges account for about a fifth of the cost of extracting oil in Russia, Lukashov said.
Surgutneftegaz has said it plans to build 11 power generators based at its oil fields this decade, enough to supply about a quarter of the electricity the company uses to extract oil.