Russian Natural Gas Production Cost to go up Four to Eight-Fold?

The natural gas production cost in Russia may go up 4 to 8-fold in the years to come, Vladimir Rezunenko, a department director of Gazprom, Russia's natural gas giant, said Monday as opening the all-Russia oil and gas week.

Cheap natural gas deposits have been almost totally exhausted, while gas production on the Yamal peninsula, a new strategic area, will be somewhat more expensive, said Mr Rezunenko. Besides, the project will call for huge investment in the infrastructure.

Domestic natural gas prices are going to be raised up to the international market level, since Gazprom is facing the task of boosting production of the fuel from the current 520 billion cubic metres a year up to 700 billion by 2020.

The Gazprom management expects radical changes to be brought about in the government's price policy, according to Aleksandr Ananenkov, a Gazprom board member. He said an average price of domestically produced gas makes $16.4 per 1,000 cubic metres at the moment. However, it is no less than $30 per thousand that can ensure a minimum profitability of gas production, according to Mr Ananenkov.

As to gas production on Yamal, the project will be economically nonviable if the price is lower than $75 per 1,000 cubic metres, said Mr Ananenkov. Twenty years of development of Yamal's deposits will cost $69 billion, he added.

He said that gas tariffs should be raised for business entities, and should remain stable for individuals.