Bill Gives Priority to Gas Power

VedomostiProducers are obliged to utilize 95 percent of their associated gas by 2012.

The government submitted a bill that would give priority access to the wholesale electricity markets to electricity stations that are fueled by associated gas, the Energy Ministry said Wednesday.

The bill aims to help oil producers, which are obliged by law to utilize an annual 95 percent of their associated gas by 2012.

“The bill will give an incentive to investors to build power stations that use associated gas to produce electricity,” the ministry said in an e-mailed response to questions. “And it will also make it more economical for oil companies to refine associated gas.”

As little as 25 percent of 55 billion cubic meters of associated gas extracted annually in Russia is refined, the ministry said. Most of it is flared — a process that sends tons of carbon dioxide into the atmosphere. In January, the government ruled that 95 percent of all the associated gas extracted in Russia annually must be utilized by 2012.

It wasn’t immediately clear how power stations using associated gas would be given priority. System Operator, which regulates the markets, accepts bids to determine which power station will supply the market on a daily basis. It said it would not change its basic bidding process. “It will just give us other criteria for choosing a generator,” said Dmitry Batarin, a spokesman for the regulator. Priority is currently given to nuclear stations, which don’t have flexibility in the volumes they trade.

Only two power stations currently use associated gas: Surgut Power Station, controlled by OGK-4, and Nizhnevartovsk Power Station, jointly owned by TNK-BP and OGK-1, said Vladimir Sklyar, a utilities analyst with Renaissance Capital.

“There aren’t many areas left in the country where associated gas-fired stations can be built,” Sklyar said. “Fuel is already indicated in the contracts the generators have signed … and they can’t change it without the prior consent of the System Operator.”

Oil producers welcomed the government’s initiative. “We hope the government’s decision will soon be implemented in practice,” said Nikolai Gorelov, spokesman at TNK-BP.