Gazprom-Wintershall Joint Project Begins in the North Sea

Germany’s largest crude oil and natural gas producer, Wintershall, has announced the start of production at the Sillimanite gas field in the North Sea, together with Russian energy giant Gazprom, Vedomosti reports.

Experts told the business newspaper that the projects’ production volumes might not be its main attraction. This is an image project for Gazprom since the company will work with one of its most important German partners in a prestigious European production region.

The Sillimanite field was discovered in 2015 in the southern North Sea. It is roughly equal in distance from the shores of Great Britain and the Netherlands, which is why it falls under the jurisdiction of both countries, but WINZ (39.7%) is the operator in both cases, and Gazprom EP International directly owns another 19.9% in the project. Representatives of Wintershall Dea and Gazprom EP International have not yet commented on the field’s reserves.

“Gazprom receives image dividends from working with one of its most important German partners in a traditional and prestigious European oil and gas production region. This experience is really unique, because, for example, Gazprom was not allowed on the Norwegian shelf,” Sergey Kapitonov, an analyst with the Energy Center at Skolkovo School of Management told Vedomosti.

“In addition, work in offshore gas fields means using current technologies as well as mastering new ones, which Gazprom may not have enough of, given the generally ‘continental’ nature of the company,” he added.

Production in the North Sea is more expensive than in Western Siberia. The average cost here is estimated at $15 per barrel of oil and about $92 per 1,000 cubic meters of gas, Kapitonov noted. “But consumer centers are in close proximity, and operator companies do not need to spend money on expensive transportation. And in the structure of Gazprom’s gas price in Europe, the main share falls on transportation costs and export duties,” the analyst said.