Gazprom's proved natural gas reserves decline as demand rises

OAO Gazprom, the world's biggest natural-gas producer's proved gas reserves fell to 16 trillion cubic meters last year from 16.4 trillion, according to an audit by DeGolyer and MacNaughton based on Society of Petroleum Engineers standards, the Moscow-based company said in a bond prospectus. The International Energy Agency in July said Gazprom may not be investing enough in field development to meet future supply demands. Gazprom provides about a quarter of Europe's gas and may supply more as North Sea fields yield less fuel. It has been buying more central Asian gas, which is cheaper, for customers such as Ukraine, which don't pay top European prices.

Gazprom's proved reserves fell for the third consecutive year, with the company replacing 57% of proved reserves since 2002, Deutsche Bank AG's Russia unit said in a report yesterday. Gazprom should be able to „cope with this worrying trend” as it speeds up development of fields in Siberia and the Arctic seas, the bank said. Proved and possible gas reserves fell 1.4% to 20.7 trillion cubic meters last year, after rising 14% to 21 trillion cubic meters the previous year, according to the prospectus. The state-controlled company has been putting most of its capital spending into nationwide gas pipelines and storage rather than exploration. Gazprom has boosted reserves largely by regaining control over gas assets lost under previous management in the 1990s and acquiring oil and gas assets, such as OAO Sibneft, now called OAO Gazprom Neft. That company's gas reserves weren't included in the reserves in Gazprom's prospectus.

Until 2010, Gazprom will boost output by developing existing fields and nearby fields in Western Siberia. It plans to boost output to as much as 560 billion cubic meters in 2010 from 548 billion cubic meters last year. Gazprom's major new fields in Siberia's Yamal Peninsula and the Arctic seas may start producing in about five years. The company recently shifted its planned market for gas produced at its Shtokman project to Europe from the US Under Russian standards and including Sibneft, Gazprom's reserves rose 0.7% to 29.1 trillion cubic meters last year, and fell to 29 trillion in the Q1, Interfax reported yesterday. (Bloomberg)