USSR: ASTRAKHAN NATURAL GAS PROJECT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP95B00915R000500140017-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 19, 2016
• Document Release Date: September 16, 2005
• Sequence Number: 17
• Publication Date: December 3, 1982
• Content Type: OUTLINE

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USSR: Astrakhan IIatural Gas Project
I. The Soviets in recent months have put development of the
Astrakhan natural gas project on a fast track.
A. This project is scheduled to produce 3 billion cubic
,meters gs a year b198 and probably could produce
30 to 60 billion cu is meters when development is
completed around 1990--equal to about 10 percent of
current Soviet gas output.
B. Negotiations with potential Western suppliers for some
$1.5 billion in pipe and equipment needed to develop
the gas fields have intensified sharply since the
summer of 1982; the Soviets hope to conclude most, if
not all, of the contracts by early 1983.
C. The project was included in early versions of the 1981-
85 economic plan and contracts were actively discussed
with Western firms beginning in the late 1970s. It was
put on a back burner, and apparently removed from the
five year plan, in 1981 because of Moscow's
concentration on the Yamal pipeline. With the Yamal
project well in hand, the Astrakhan project was moved
back into the plan and apparently now has top priority
with Moscow among cooperative energy projects with West
European firms.
D. The West rn o ries involved in bidding on the
project, are trying to
find ways around the OECD consensus interest rate,
mainly on the grounds that contract discussions started
several year ago.
II?. Soviet geologists estimate that the Astrakhan fields--which
are located north of the- Caspian Sea in the Southern USSR
(see map)--may contain up to 6 trillion cubic meters of
gas, making it nearly as large as Urengoy.
A. Development of these gas reservoirs will be extremely
difficult, however, since nearly 37 percent of the gas
consists of noncombustible contaminants--about 25
percent hydrogen sulfide (H2S) and 12 percent carbon
dioxide (C02)--which are highly corrosive and hazardous
to handle.
B. Moreover, the gas reservoirs are located at depths of
more than 4,100 meters--twice as deep as those at
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Urengoy--with reservoir pressures of 630 atmospheres
(9,300 psi) and temperatures of up to 150 degrees
centigrade.
III. The Astrakhan project is important to the USSR as a source
not only of fuel but also of sulfur and other raw materials
needed for expanding phosphate fertilizer and petrochemical
production.
A. Moscow wants to use Astrakhan natural gas to compensate
for depleted gas-producing capacity at the vast
Orenburg field and for replacement of output from North
Caucasus gas reserves and output, which are nearing
exhaustion.
B. Al thou intended yrimarily to meet domestic gas
C. The Astrakhan project also includes ambitious plans for
sulfur plants with a total capacity of about 3 million
tons a year.
D. Although the USSR produces in excess of 11 million tons
a year, second only to the United States, sulfur is in
tight supply in the USSR.
E. Poland--which at one time provided about 7 percent of
Soviet sulfur consumption--can no longer be counted on
for sizeable deliveries; thus, the USSR has had to turn
to Western countries to help meet its domestic needs.
F. In addition, the carbon dioxide removed from the gas
will be transported via a 630-kilometer pipeline for
injection into the Gur'yev oil fields to enhance oil
recovery.
IV. The Soviets will require Western equipment and technology
to drill and equip the wells, construct gathering lines,
and build gas-processing and refining plants.
A. The hard currency cost is expected to be about $1.5
billion, of which as much as $650 million may be needed
for special corrosion-resistant seamless tubular steel
and large diameter pipe.
B. Future maintenance of the large gas complex also will
require the procurement of Western equipment and
technology.
V. Negotiations for Western euiment which b_epan in 1977_ and
=aroc4 a e sultor fashion, have reatl iked
the summer o 1982,
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B. The Soviets have stipulated that US equipment is to be
purchased only if it is unavailable elsewhere.
C. The Soviets say they want to sign some contracts before
the end of 1982 and wrap up the remainder by the end of
1983. Such a ace wou -be unprecedented but Moscow
clearly is mov n ra a verses o pipe
or t e Astrakhan project reportedly have begun.
VI. The Soviets are pressing hard to obtain concessionary
Western loans to finance imports of machinery and equipment
for the project.
A. Not surprisingly, Moscow is insisting on below market
rates--specifically, they want to pay no more than the
7.8 percent rate obtained on Western government-
guaranteed credits for the Yamal pipeline.
B. This rate is far below the OECD consensus rate of 12.4
percent and is even below the lowest recent non-
subsidized rate on Western contracts with the USSR--a
C. The Soviet tactics are having an effect: in an effort
to win contracts, nd France reportedly are
considering "gran a er ng" the rate to 1981 or
earlier, on the. grounds that negotiations were well
along at that time.
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The ilstrahham Aatural Gas Project In brief
Developcent Stage
Up to 37 producing wells
in the 'first stage, including 10
observation wells (eventually up
to 2000 wells); well maintenance
equipment. Cost $100 million.
500-kilometer gas gathering
system. Cost $250-$300 million.
Natural Gas Plant.
Cost $550-$650 million.
Product Pipelines:
A 360-kilometer gas pipeline
(Astrakhan-Kamush-Burun) to the
North Caucasus.
A 580-kilometer condensate
(natural gas liquids) pipeline to
ship gas to petrochemical plants.
A 630-kilometer carbon dioxide
(CO ) pipeline to the Gur'yev oil-
fields for use in enhanced oil
recovery. Cost $350-$450 million.
Requirements for Western Goods
Special, drill pipe; corrosion resistant, high-
pressure blow-out preventors; casing and tubing;
well-heads,,christmas trees, and valves. Well
maintenance equipment includes workover rigs,
snubbing equipment and replacment casing and tubing
with leakproof joints; special equipment tools and
supplies to break out hydrate and sand plugs, and to
prevent formation of same in producing gas wells.
Three Western firms negotiating for subcontracts
under the gas gathering system are located in the
UK. Italian, West German and Mexican companys are
also bidding.
Corrosion resistant linepipe for the collection
mainfolds and gathering lines along with associated
computer systems and valves. In late November,
three competing firms were in the bidding:
Equipment for removal and recovery of natural gas
liquids, sulfur, and CO2 from natural gas streams.
The cost of the sulfur recovery plant alone may be
as high as $300 million while the cost of related
pipe and tubes could be $250-350 million. Numerous
Western firms are competing for the contracts
including Mannesmann, Sumitomo, Nippon Steel,
Missoiwai, Marubeni Nichimen, ENI, Liurgi, and
Creusot Loire.
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S
USSR: The Astrakhan' Natural Gas Project (u)
Having secured Western assistance in developing
the Siberia-to-Western Europe gas pipeline, Mos-
cow is again turning to the West for equipment to
develop its natural gas reserves at Astrakhan'.
Astrakhan' gas, however, will be used primarily for
domestic purposes rather than export. A revitalized
Soviet interest in developing the Astrakhan' deposit
reflects the USSR's need to restore gas supply to
the Caucasus region following the cutoff of Iranian
gas in 1979, to increase chemical fertilizer produc-
tion, and to activate backup capacity for the Soyuz
export pipeline. (C)
one-third of the gas consists of noxious, noncom-
bustible contaminants-about 25 percent hydrogen
sulfide and 12 percent carbon dioxide-which are
highly corrosive and hazardous. Moreover, the gas
reservoirs are located at depths of more than 4,100
meters-twice as deep as those at Urengoy-with
extremely high reservoir pressures of 630 atmos-
pheres (9,300 psi) and temperatures of up to 150
degrees Celsius. (U)
The Need for Western Technology
Negotiations with potential Western suppliers for The Soviets will require substantial Western equip-
$1.5 billion worth of pipe and equipment needed to
develop the gasfields have accelerated since the
summer of 1982; the Soviets-perhaps optimisti-
cally-hope to conclude most if not all of the
contracts early this year. The Western countries
involved in the bidding are considering ways of
accommodating Soviet demands for highly conces-
sionary interest rates. (C)
Dimensions of the Project
Soviet geologists estimate that the Astrakhan' gas-
field may contain up to 6 trillion cubic. meters of
gas, making it nearly asrarge as the one at
Urengoy. When brought on stream, the project
could eventually produce 30-60 billion cubic meters
of gas, nearly, 3 million tons of sulfur, and 1.8
million tons of stable condensate annually. The
sulfur and condensate will be used as feedsjock for
chemical plants. The Soviets were forced to halt
deep exploratory drilling at Astrakhan' in the late
1970s because they lacked sulfur-resistant tubing,
casing, and drill pipe. (C)
Development of the Astrakhan' gas reservoirs will
be extremely difficult and time consuming. Over
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28 January 1983
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ment and technology to ultimately drill and equip
some 2,000 wells, construct gathering systems, and
build gas-processing and sulfur recovery plants to
develop the Astrakhan' deposits. We expect the
hard currency cost to be about $1.5 billion, of
which as much as $650 million may be needed for
special corrosion-resistant seamless tubular steel
and large-diameter pipe. About $100 million is to
be spent on well equipment, $250-300 million on
the gathering system, and perhaps $550-650 mil-
lion on the gas and sulfur processing plants. An
additional $350-450 million could be spent on
pipeline construction. Maintenance of the gas com-
plex will be tied to the procurement of Western
equipment and technology. (c)
The Western Players
f egotiations for Western equipment be an in 1977
d cconti- Hued sporac ica Y y over t e next four years.
eelld development that had been scheduled for the
1981-85 Plan was canceled but has since been
reinstated
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Secret
28 January 1983
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At least 15 major Western firms reportedly are
vying for Astrakhan' contracts. A French consor-
tium led by Technip signed a $400 million contract
for the gas plant and related pipe and tubes on 21
December 1982. Recent reporting indicates that
the West German firm Mannesmann has won a
contract for the gas-gathering system, but no de-
tails on the terms are available. (c)
In their negotiations with the West European and
Japanese firms, the Soviets have stipulated that
equipment is to be purchased from the United
States only if it is unavailable elsewhere. Some US
equipment and special corrosion resistant seamless
tubular steel are likely to be needed. (c)
Fmnncing the Project
The Soviets are pressing hard to obtain concession-
ary Western loans. They would probably balk at
interest rates over the 7.8 percent obtained on
Western government-backed credits for equipment
for the new Siberia-to-Western Europe natural gas
pipeline. (C)
The Western governments are complaining that
they are being whipsawed between a desire for their
firms to win contracts and the wish to at least
appear not to be straying too far from the OECD
interest rate consensus. In July 1982 the OECD
countries agreed to fix minimum interest rates to
be charged on official lending to the USSR at
12.4 percent for high interest rate countries-and at
0.3 percentage point above the long-term domestic
market rate for low-interest-rate countries. (C)
' With the momentum of the Astrakhan' negotiations well under
way, Soviet negotiators repoetedly are now moving ahead with
discussions on other sour gas projects-et Karashaganak roughly
120 kilometers southwest of Orenb1Tg and at Tengiz some 500
kilometers cast of Astrakhan'. (s NF)
Astrakhan' Natural Gas
oject in Brief
Jp to 66 producing wells in
e two stages, including 10
observation wells (eventually
up to 2,000 wells); well main-
tenance equipment.
Cast: $100 million
504-kilometer gas-gathering
.system.
Cost: 8250-300 million
Natural gas plant.
Cost: $550-650 million
Production pipelines:
A 360-kilometer gas pipeline
(Astrakhan'-Ka mush-
Burun) to the North Cauca-
sus.
A 580-kilometer condensate
pipeline to transport natural
gas liquids to petrochemical
plants.
A 630-kilometer carbon di-
oxide pipeline to the Gur'yev
oilfields for use in enhanced
oil recovery.
Cost: 5350-450 million
This table is Secret Noforn.
Secret
28 January 1983
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Special drill pipe; corrosion-resis-
tant, high-pressure blowout pre-
venters; casing and tubing; well-
beads, Christmas trees, and valves.
Well maintenance equipment in-
cludes workover rigs, snubbing
equipment, and replacement casing
and tubing with leakproof joints;
special equipment tools and supplies
to break out hydrate and sand plugs,
and to prevent formation of same in
producing gas wells. Three Western
firms negotiating for subcontracts
under the gas-gathering system are
located in the United Kingdom.
Italian, West German, and Mexi-
can companies also are bidding.
Some US investment is likely.
Corrosion-resistant linepipe for the
collection manifolds and gathering
lines along with associated comput-
er systems and valves. In late No-
vember. three corn tin firms were
in the biddingF-
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In an attempt to get around the new OECD ; fertilizers and petrochemicals. Kremlin leaders
consensus guidelines, the Western countries have want to use Astrakhan' natural gas to compensate
been considering "grandfathering" offered rates to for depleted gas-producing capacity at the vast
earlier periods and-in some cases-raising equip- Orenburg field and to replenish nearly exhausted
ment prices to com nsate for reduced interest supplies in the Transcaucasus and North Caucasus.
rates Iranian gas was being imported at the rate of 10
billion cubic meters a year when shipments were
I halted in 1979. Natural gas from Astrakhan' could
flow at a rate of 3 billion cubic meters a year b
1985 and perhaps 30 - b i l l i o n to M E lion cubic
meters a year by 1990. Present Soviet output of
natural gas is about 495 billion cubic meters a year.
(C)
We have little information on the repayment terms
for the Astrakhan' credits, but Moscow probably
will attempt to procure terms of eight years or more
with an initial grace period. The OECD consensus
agreed to in July stipulated that no East European
country would be eligible for credits of more than
eight and a half years. Financing of machinery and
equipment for the -Siberia-to-Western Europe
pipeline included credits with repayment periods
over eight years after an initial three-year grace
period on repayment of principal. In the case of
financing for pipe, it is likely that the Western.
lenders will insist on annual negotiations and will
not offer repayment periods of more than five
years. (C)
The Astrakhan' project is important to the USSR
as a source of additional gas and sulfur and natural
gas liquids needed for expanding production of
Secret
28 January 1983
Although intended rimarilto fill domestic gas
u cements t e Astrakhan' fields will hn-
tam Soviet gas exports to t astern ad e
ern Europe via the Orenburg pipeline by making up
for any production decline elsewhere. At present,
the Orenburg line carries some 16 billion cubic
meters a year to Eastern Europe, and it could carry
another 13 billion cubic meters to Western Europe.
In 1981, hard currency receipts from sales of gas
totaled $4 billion, or about 15 percent of total
Soviet commodity export earnings. (C)
When the new Siberia-to-Western Europe pipeline
is completed, the Astrakhan' project will give the
Soviets even greater flexibility to maintain or-as
has been hinted-to increase gas exports to Eastern
and Western Europe. An offer of stepped-up gas
deliveries would help offset the impact of cutbacks
in oil shipments to Czechoslovakia, East Germany,
and Hungary. (C)
The Astrakhan' project includes ambitious plans
for sulfur production of about 3 million tons a year,
larger than any sulfur complex in the world. Al-
though the USSR, with an output in excess of 11
million tons, is second only to the United States in
production, sulfur is in tight supply in the USSR.
Because there are few large reserves of sulfur
suitable for mining, the Soviets are turning increas-
ingly to recovery of byproduct sulfur from sour gas,
oil, metal smelters, and possibly coal. Moreover,
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Poland-which in 1980 provided about 7 percent of
Soviet sulfur consumption---cannot be counted on
for large increases in deliveries. Thus, the USSR
has had to turn to Western countries to help meet
its domestic needs. (c)
Finally, the project is expected to make available
1.8 million tons of stable condensate for feedstocks
at petrochemical plants. In addition, the carbon
dioxide recovered from the gas will be transported
via a 630-kilometer pipeline for injection into the
Gur'yev oilfields to enhance oil recovery. (c)