APG utilization and payments

APG utilization target value included into energy strategy of Russia (95% by the start of 2015) was not achieved in 2014, although the expansionary activities implemented in 2012 influenced the oil companies and facilitated the needed tendency. APG flaring was further decreased last year and if the crisis does not interfere, the oil companies will increase the volumes of APG utilization at least up to 2017. 
Preliminary results of 2014 show further increase in APG utilization in the Russian Federation. By less than 22% of APG was flared within 9 months last year (8.4 bn cbm against the similar period of 2013), and gas volume the company used for its own needs within the period from January to November of 2014 increased by 13.5% (the growth rate of APG production for this period increased by 1.5%). According to the acting assessment, the utilization index will increase 80% which exceeds the 2013 index (78.8%). 
Tightening of ecological regulations can be considered as the major motivation for beneficial use of associated gas. In compliance with the new strict regulations the companies shall be obliged to pay billions of rubles. Another motivation for APG utilization was decreasing the payment for emissions by the amount of the expenses for the implementation of the utilization projects.
The Ministry of Natural Resources expects 93.7% of APG utilization by the end of 2015, although the index will reach the planned value only after the growth of the relevant indexes with the biggest producers Rosneft, LUKOIL and Gazprom neft, reaching them after 2017.
According to the data from the Ministry of Natural Resources the biggest investments into APG utilization were made by Rosneft. The state company is the chief APG producer of the Russian Federation. In 2011-2013 Rosneft invested 77.5 bn rubles which allowed to raise the utilization ratio from 53.4% to 69.8%.
According to the results of 2014 the state company expected to reach 80% of APG utilization mostly by means of the construction of the systems of the external gas transportation from Vankorskoye and Malo-Balykskoye fields (were commissioned in H1 of the last year) as well as to increase the utilization index up to 95% at the particular fields of the YaNAO.
Another major producer Gazprom neft plans to reach the utilization standard after 2016. It produced 7.6 bn cbm of the associated gas. Herewith the major step was made in 2012-2013 when the utilization index was increased up to 69.3 and 79.9% accordingly. Last year the index of efficient APG utilization increased up to 81%. 
Capital investments of Gazprom neft into APG utilization projects made up 6.3 bn RUB. last year.
The major projects of Gazprom neft in this sphere include construction of gas processing plant at Yuzhno-Priobsksya compressor station, Yety-Purovskaya and Myldzhinskaya compressor stations as well as expansion of gas transportation system in Orenburg region in order to supply APG to Orenburg gas and chemical complex. 
The situation with APG utilization in LUKOIL producing 10.7 bn cbm per year is better than at the state oil companies.
By the beginning of the last year the company of Vagit Alekperov achieved the index of APG utilization of 87.8.% and constructed 18 compressor stations within 2011-2013, above 700 km of gas pipelines and multiphase pump stations.
LUKOIL plans to reach standard indexes in 2016, not mentioning the new projects. In total it is planned to spend around 1.5 bn USD for the APG utilization improvement. The APG utilization ratio increased slightly because the implemented projects were not completed. According to the results of 2014 it made up 89.9% (against planned 90,8%). The major projects of LUKOIL influencing APG utilization are situated in Perm, at Iyichevskoye field, in Tamano-Pecherskiye fields as well as at the fields of the northern Caspian region.
The highest dynamics of the utilization increase in 2014 was shown by RussNeft, the volume of APG flaring decreased by 3.5 against 2013 (to 110 mln m3) and the utilization volume raised from 77.1 up to 93%.
According to the information from the company the utilization index reached 93.7% in December 2013. This year the OAO Belkamneft and OOO Zapadno-Malobalykskoye were excluded from the structure of the company, although a small interest in total gas production output (4%) did not influence RussNeft significantly.
The major project influencing the growth of APG utilization was the construction of the system of two 94 km pipelines: gas pipeline KS-3 Varioganskaya and gas pipeline DNS-Roslavlskoye – tie-in point. The constructed system allowed transporting around 400 mln m3 of APG from the major producing subsidiaries of RussNeft – Beliye Nochi and Aganneftegazgeologiya (the utilization rate for the companies reached 96%).
The energy complex with 17 Jenbacher gas power plant (general capacity makes up 19.2 MW), and compressor station for APG injection on the deposit (capacity around 50 mln m3 per year) were commissioned at Stolbovoye field in 2013 allowing to achieve the standard of APG utilization at the field in 2014 (at the moment it has reached 99%). 
Last year in order to support the reached APG utilization volume RussNeft launched the ejector station at the oil-processing plant at Nizhne-Shapshinskoye field (gathers APG at the last stages of separation to supply for processing), commissioned gas pipeline from the oil-processing plant at Fedyushkinskoye field to gas turbine power station at Igolsko-Talovoye field of Tomskneft at two Jenbacher gas piston units at Eguryakhinskoye field and gas boiler at Varioganskoye field.