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UPDATE 2-Gazprom Neft looks to alternative suppliers to sidestep sanctions impact

Mon, 15th Sep 2014 12:36

* Prirazlomnoye is Russia's first Arctic offshore oil field

* Gazprom Neft sticks to plans at the field, by 2020 as awhole

* Executive says "nothing unique" in drilling for shale oil (Adds details, quotes, colour, background)

By Katya Golubkova

PRIRAZLOMNAYA OIL PLATFORM, Russia, Sept 15 (Reuters) -G azprom Neft, the oil arm of Russian state gas companyGazprom, may turn to alternative equipment providersto meet production targets at its Prirazlomnoye oil field in theArctic, after Western sanctions restricted access to existingsuppliers.

Speaking on Friday before Washington banned Westerncompanies from supporting Gazprom Neft in exploration orproduction in deep water, Arctic offshore and shale projects,Vadim Yakovlev, first deputy CEO at Gazprom Neft, said hebelieved the company could stick to its long-term goals asthings stood.

But aware further sanctions were on the cards over Russia'srole in the Ukraine crisis, he added: "If events go under themost negative scenario, we are working at options to buy(equipment) from alternative sources or producing it by Russianor Asian companies."

"At the moment, we don't think that this will affect ourlong-term plans," Yakovlev told reporters on a visit to thePrirazlomnaya platform some 60 km (40 miles) offshore in theArctic's Pechora Sea. He did not name any affected companies.

Yakovlev said the field should reach peak oil production of5.5 million tonnes (110,000 bpd) by 2021, after which it wouldproduce more than 4 million tonnes a year for around threeyears. By 2020, the company as a whole should produce 100million tonnes of oil equivalent.

The field is Russia's first offshore Arctic field - a keysource for future hydrocarbon production growth in Russia, theworld's biggest oil producing nation. Its oil production standsat around 10.5 million barrels per day (bpd).

Gazprom Neft is already under EU sanctions barring it fromraising financing in Europe and now is one of five Russianenergy companies to be targeted by Washington.

Yakovlev estimated that foreign firms which he declined toname were responsible for less than half of all the work done atthe platform, including drilling and maintaining equipment.

SECOND CARGO

On Friday, it was weather rather than sanctions thataffected operations at the platform. A tanker supposed to shipthe second cargo of 70,000 tonnes of Arctic Oil or ARCO wasanchored some 500 metres away to start loadings but the wind wastoo strong.

"The wind is so strong that tanker decided not to docktoday," Alexander Vasilyev, head of the Prirazlomnaya platform,told Reuters.

Gazprom Neft said on Monday it had started to load thesecond tanker, out of four planned for this year, over theweekend. It should move to northwest Europe soon.

The company did not name the buyer. Traders told Reutersearlier that France's Total bought the first cargowhich left this spring. In total, the field plans to produce300,000 tonnes of oil this year.

The Arctic is estimated to contain 20 percent of the world'sundiscovered hydrocarbon resources, which along with shale oil -where Russia is believed to have the largest resources globally- should support Russia's oil production.

Currently, Russia extracts a tiny amount of oil fromoffshore in the Arctic and less than 1 million tonnes a yearfrom unconventional resources. Gazprom Neft and Surgutneftegas are pioneering shale oil work in Russia.

Last year, Gazprom Neft increased hydrocarbon production by4.3 percent to 62.2 tonnes in oil equivalent. In oil equivalent,production should add around 5.5 percent this year and around2.5 percent by oil. In 2015, growth should be higher, he said.

Gazprom Neft is exploring for shale oil on its own and viatwo joint ventures with Royal Dutch Shell Plc.

"We will continue to work on these projects. In terms oftechnologies, there is nothing unique there - it is moreknow-how or skills to use traditional techniques of horizontaldrilling ... for this type of formations," Yakovlev said. (Editing by Elizabeth Piper and David Holmes)

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