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. Last Updated: 07/27/2016

Federation Council Looks Set To OK North Astrakhan PSA

The Federation Council is expected to give the final go-ahead to the multibillion dollar North Astrakhan production sharing agreement Wednesday, the project's manager said Tuesday.

The Federation Council, parliament's upper chamber, will be following in the footsteps of the State Duma, which last week unanimously voted to support the North Astrakhan PSA.

According to Vasily Petrov, general director of Astrakhannefteprom, which runs the North Astrakhan PSA, the Federation Council's approval will propel the multibillion dollar project to a new stage.

Astrakhannefteprom was set up about two years ago by the Astrakhan Regional Property Fund and the Moscow-based Stroitransgas, a company reportedly linked to the Gazprom natural-gas monopoly.

By the end of the year, Astrakhannefteprom plans to drill six more research wells on its oil field in the Astrakhan region, with the hope of getting a clearer picture of the field's future potential, Petrov said.

The field, discovered a few years ago, is estimated to hold over 350 million tons of crude oil and some 150 billion cubic meters of gas. Once put into production, the field is expected to deliver 27 million metric tons of crude oil per year.

One of the difficulties the project faces is the depth at which the crude reserves are located - over 5 kilometers below ground.

"More than $4.5 billion in investment will be required over the next 25 years to run this project," Petrov said.

Petrov refused to disclose who the investors would be, but hinted that Astrakhannefteprom was in talks with foreign partners.

"Who do you think has this kind of money within Russia," he said in a telephone interview Tuesday.

According to Petrov, the project should enter the production phase in five years.

North Astrakhan PSA is located in close proximity to the Caspian Pipeline Consortium, which is building fresh links to the old Soviet pipeline system that will allow crude to flow from Kazakhstan's giant Tengiz oil field to the Russian Black Sea port of Novorossiisk.

The oil from the North Astrakhan PSA project could also be transported to a refinery in Samara and to a petrochemical plant in the Astrakhan region itself, Petrov said.

According to Steven Dashevsky, an oil analyst with the Aton brokerage, the Duma's sanction of the North Astrakhan PSA might also give a boost to the purchase of a 2.5 percent stake in Gazprom by Italian gas firm ENI, which had earlier said it would buy the stake only if the North Astrakhan PSA was approved.

Italy's Agip SpA, British Petroleum, France's Total SA, the Royal Dutch/Shell Group, the Oman Oil Co., as well as U.S. giants Chevron, Mobil and Unocal, had all earlier shown interest in investing into the North Astrakhan oil project.