Novatek’s highly fancied wildcat on recently acquired acreage on the Gydan Peninsula in the Yamal-Nenets region of West Siberia has found just a fraction of the gas reserve that was expected.

The company, Russia’s largest independent gas producer, said that a first exploration well on the Bukharinsky block led to the discovery of about 52 billion cubic metres of recoverable natural gas.

The discovery will be added to the Novatek’s portfolio as its third liquefied natural gas project in the Yamal-Nenets region, known as Arctic LNG 1.

In December 2019, Arctic LNG 1 paid 2.35 billion rubles ($37 million at the time) to obtain a 27-year exploration and development licence for the Bukharinsky tract.

Following the purchase, Novatek said the block had been estimated to be as harbour as much as 1.2 trillion cubic metres of gas and about 550 million barrels of condensate and oil.

But the first well was only able to identify some 15 million barrels of liquid hydrocarbons besides announced recoverable gas reserves, the company said this week.

The Bukharinsky block covers an area measuring more than 2400 square kilometres, however, about one-third of the onshore tract lies in the shallow waters of the Ob and Taz Bays. The bays separate the Gydan Peninsula from the Yamal Peninsula, where Novatek’s first LNG project — Yamal LNG — began operations in 2017.

Record output

Yamal LNG is expected to produce a record 21 million tonnes of LNG this year, compared with 19.6 million tonnes in 2021, according to operating consortium deputy executive director Vladislav Khlybov, who was quoted by Moscow-based news agency Interfax.

The four liquefaction trains have a total nameplate capacity of about 17.4 million tonnes of LNG per annum, although low ambient temperatures on site have helped Yamal LNG to produce more than this.

Yamal LNG’s output is usually sold on the spot market rather than delivered under long-term contracts.

The consortium is understood to have sent a significant proportion of its LNG cargoes to the European market this year following the decision of Russian gas giant Gazprom to drastically reduce its pipeline gas supplies to the continent.

The operator has pushed back the start of annual maintenance works at the Yamal trains by one year to 2023 to avoid interruption to LNG production and loadings in this period, according to the same executive quoted by Interfax.

According to Russian law, Yamal LNG is exempt from paying gas export tax and is expected to benefit greatly from the record-high gas spot prices that were seen in Europe earlier this year.

Novatek has a controlling 50.1% stake in Yamal LNG, with France’s TotalEnergies on 20%, China National Petroleum Corporation with 20% and the Chinese government’s Silk Road Fund has a 9.9% interest.