Irkutsk Oil Company expands gas project into polymer production

Transcript

Irkutsk Oil Company was the first oil producer established in eastern Siberia. In 2010 it embarked on an innovative gas project; the first of its kind in Russia. It began with reinjection of natural and associated gas to improve its recovery rates and reduce emissions. Today the project is moving into gas process and polymer production; and in the future, explains chief financial officer Yuriy Rubin, may turn to electricity generation to power crypto-currency mining companies. He discusses the progress the business has made, and its competitive advantages selling polyethylene to China.

World Finance: Talk me through your existing gas facilities.

Yuriy Rubin: Our gas properties are not connected to any gas infrastructure. There is no gas infrastructure in the Irkutsk region, and that’s why we came to the solution that instead of selling – or trying to sell – gas into gas pipelines (which as I said doesn’t exist) we’d rather process it into various components, and market them separately.

It started with a gas cycling process, the first of its kind in Russia, to recycle gas, reinject it back into formation, to maintain zero pressure and simultaneously strip off condensate – the most heavy and valuable product that can be recovered from the gas.

This condensate is recovered and added to oil production to increase its quality.

World Finance: And you have extensive upgrades planned through to 2022?

Yuriy Rubin: Last year we installed a 3.6 million cubic metres per day gas processing facility, which allows us to recover LPG – liquefied petroleum gas, a common name for a propane-butane mix – which already started reaching the market. And when we increase capacity will be exported.

Next stage would be installing three additional gas processing units, which would allow us to separate ethane. We have very high content of ethane at our gas properties. Up to 13 percent of ethane. And that was the reason why we decided to consider a polymer plant.

Irkutsk polymer plant will have a capacity of 650,000 tonnes of polyethylene. There is a very big demand in this part of Asia – especially in China – for this product.

World Finance: You’ll be a new player coming into some busy markets; what’s your competitive advantage?

Yuriy Rubin: Our biggest competitive advantage is our proximity to the Chinese market, which is still the number one location in this part of the world.

Second would be our proximity to other Asian countries like Thailand, Vietnam, and other countries of south-eastern Asia.

Also we have cheap labour, cheap electricity, and the most important: cheap feedstock. So, we are ready for competition.

World Finance: You’re working your way up the hydrocarbons chain; do you have plans to monetise methane?

Yuriy Rubin: Sure. We studied almost all options available in the market, including production of fertilisers. But still the best would be of course production of electricity.

For instance, last year we were approached by many companies that were interested in mining crypto-currencies. That could be in general a very good solution for any stranded gas field, when you have no other means to monetise gas assets. So we are studying this option.

It doesn’t mean we will mine bitcoins – or any other cypto-currencies – ourselves! First of all we are a large oil company; it’s not our business. But when we see a gold rush, it’s so tempting to service those people who are participating in that gold rush.

World Finance: You are as you say, a large oil company; your oil production has also increased significantly over the last five years.

Yuriy Rubin: That’s right. Last year we produced almost 8.5 million tonnes – that’s quite a significant increase. Since our inception we’ve attained about 40 percent compound growth rate of oil production.

Unfortunately for next year it will be capped by the decision of Russia to join OPEC, and we might not increase our production as much as we desire or are capable of.

Last year we acquired several exploration blocks. It’s quite important for an oil company to grow its assets. And we hope that from exploration we will be able to maintain our production at least at the level of 2017, and hopefully bigger, especially when there will be no restrictions.

World Finance: Finally, how important to the region are all of these developments that you’re driving?

Yuriy Rubin: I would say it’s extremely important. Irkutsk Oil Company employs approximately 7,000 people, and many people in the Irkutsk region – not only families, but supplemental businesses – really depend on Irkutsk Oil Company.

Also we are registered in the Irkutsk region, and we pay local taxes. Last year over 10 percent of the regional budget was funded from taxes that Irkutsk Oil Company paid.

Also, Irkutsk Oil Company makes very big contribution in the social and economical life of the region. We support many activities, charitable organisations, and cultural events. We care about environmental issues a lot, and invest significantly into all activities related to protecting fragile Siberian nature.

World Finance: Yuriy, thank you very much.

Yuriy Rubin: Thank you.