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December 18, 2007

BASF producing natural gas in Siberia with Gazprom

Production launch at the Yuzhno Russkoye gas field

Gerald Ondrey

BASF AG (Ludwigshafen, Germany; and OAO Gazprom (Moscow, Russia) today officially launched production operations at the Russian natural gas field Yuzhno Russkoye. This is the first time that a German company has been directly involved in the production of natural gas in West Siberia.

The Yuzhno Russkoye field in West Siberia has recoverable reserves of more than 600-billion m3 of natural gas, which makes it about three times the size of Achimgaz, another joint venture project between Gazprom and Wintershall — a wholly owned subsidiary of BASF — to produce hydrocarbons in Siberia. Gazprom currently supplies Germany with about 40-billion m3/yr of natural gas. Based on this fugure, the Yuzhno Russkoye gas field alone could therefore supply all Russian gas exports to Germany for another 15 years.

The gas from the Yuzhno Russkoye field will, among other routes, be delivered to Europe via the planned Nord Stream Baltic Sea pipeline that will provide a direct link between the Siberian gas reserves and Germany. Plateau production of 25-billion m3/yr of natural gas is expected to be reached as soon as 2009. The Yuzhno Russkoye gas field, which lies about one kilometer below the surface, was discovered in 1969.

BASF’s shareholding in the gas production in Siberia is part of an assets swap, which has now been completed.  Wintershall received 25% minus one share of the company OAO Severneftegazprom (SNGP), which holds the license for the Yuzhno Russkoye natural gas field in West Siberia. In addition, Wintershall received a non-voting preferred share in the original capital of OAO Severneftegazprom, which gives BASF a 35% share in the economic rewards of SNGP. The issue of shares has been registered. In return, Gazprom has increased its shareholding in the natural gas trading joint venture WINGAS GmbH from 35 to 50% minus one share. Gazprom has received a 49% share in a Wintershall subsidiary that produces oil in two onshore concession areas in Libya.

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