Wintershall & Gazprom Begin Initial Work on Achimov Project

A meeting of the Coordination Committee between Gazprom and BASF was held in the town of Irkutsk on September 22. The Committee reviewed the progress of cooperation between the companies with respect to the project to develop the Area 1A Achimov Formation Urengoy Field (the Achimov Project).

The Coordination Committee noted that the Achimov Project serves an economic interest of both companies and is the initial stage of cooperation in joint development of hydrocarbon deposits by Gazprom and Wintershall, a 100%-subsidiary of BASF.

The parties stated that currently the Joint Venture Achimgaz is actively involved in completion of the Detailed Engineering work and preparation for construction of facilities for the so called Pilot Production Phase, which is the second stage of execution of the Achimov Project.

Gazprom, Urengoigazprom and Wintershall AG have developed a Basic Agreement based on the existing Framework Agreement to realize the Archimov project. The Basic Agreement mainly contains the general principles of cooperation, the project structure, the financing scheme and the procedure for sales of the produced hydrocarbon products. Currently, this document is undergoing the approvals process as per the existing procedure. The agreement will also serve as general model for future cooperation with foreign companies in the E&P business in Russia.

In a next step the implementation of the Pilot Production Phase will start with the first operational activities in Novy Urengoy. The Technical Institute TyumenNIIgiprogaz carried out the environmental due diligence study and is in the process of completing all necessary surveying activities including the selection of the operational sites. The engineering design activities progress in compliance with the agreed time schedule. The Institute will provide the Joint Venture Achimgaz with the detailed engineering results shortly.

Achimgaz has been established in July 2003 as a joint venture on a parity basis between Urengoigazprom, a 100% subsidiary of Gazprom, and Wintershall AG, a 100% BASF-subsidiary. The Company is formed to develop a first part of the Achimov deposit of the Urengoy Gas, Oil & Condensate Field. The forecasted accumulated production from this pilot area over the whole development period (at least 40 years) is 200 bcm gas and 40 mln tonnes condensate. Production during plateau phase is expected to reach 8.3 bcm gas per annum and 2.8 mln tons condensate per annum.

The parties had started initial negotiations on the establishment of the Archimov project back in 1998. Wintershall AG possesses advanced modern technologies, the required equipment and the experience to drill deep subhorizontal wells in a challenging geological environment, which is essential for development of the Achimov deposits in Urengoy.

The Achimov formation is located in a depth of 3150-3800 m and is characterized by a much more complex geological structure than the Senomanian and Valanginian deposits that are currently being produced.

The results of geological exploration activities prove the productivity of Achimov deposits over the quite large territory of Nadym-Pur-Tasov Region. The major part of recoverable reserves of Achimov hydrocarbons of this Region is concentrated at the Urengoy Gas, Oil & Condensate Field. The subsurface user license for the Urengoy Field belongs to Urengoigazprom – a 100% affiliate of Gazprom.

The Achimov formations of the Urengoy Field are divided into six areas that shall be developed in a phased manner.