Tomsk Region: Opportunities in Mining and Mineral Resources

April 2006

Author: Mark Shulgov, BISNIS representative in Tomsk, Russia

Many experts emphasize that the further economic development of Siberia will be determined by a combination of its scientific and technological potential with effective utilization of abundant natural resources. The 2005 Concept of Tomsk region development implied further development of the scientific complex and high technologies concentrated in the southern part of the region (Tomsk and Seversk cities with adjacent territories), with simultaneous industrial development based on extraction and processing of natural resources that are abundantly present in the North.

Exploration and extraction of mineral resources in Tomsk region has a great deal of promise. Mineral extraction conducted currently and ongoing geological prospecting show the presence of various highly demanded mineral resources (rare earth metals, oil and gas, iron ore, construction materials), but some major reserves remain largely uninvestigated. Full-scale prospecting and development of mineral resources, demanding new methods and technologies, starts only now, while the investment potential of this sphere is actually unlimited.

Russian companies demonstrate growing interest to this sphere, but practical steps are often restrained by lack of domestic investment (usually amounts in the order of several tens to several hundred million dollars are required for mineral extraction projects), leaving the opportunities to large western financial institutions and industrial manufacturers. Introduction of new technologies in geological exploration, mining and processing, joint venturing and other forms of investments in new enterprises, supplies of technological equipment, construction and infrastructure development are the most promising spheres of collaboration. Oil companies especially demand efficient development of new sites, under severe climatic conditions and strict time limitations.

Hydrocarbons

Tomsk region is considered one of the major oil and gas-producing regions in Russia, about 2 percent of Russian oil is extracted from this territory. A total of 106 hydrocarbon deposits were discovered in the region by 2005, including 87 oil pools, 13 oil-gas condensate and six gas condensate fields. According to official statistics, 16 deposits containing about 1.1 billion tons of recoverable oil and 1.2 billion cubic meters of free gas remained untapped in 2005.

Although more than 200 million tons of oil has been extracted so far, Tomsk region is one of the few Russian regions able to develop own oil/gas production and processing industry in the long term. However, the oil deposits under exploitation are worked out 30% on average; the share of easily recoverable reserves, where traditional technologies of extraction are applied, gradually decreases. Consequently, the demand for application of advanced technologies for oil-pool development is expected to grow.

Extraction of natural gas was started only in 1999 when exploitation of Myldzhino gas condensate deposit was started; Novo-Vasuganskoe extraction complex was put into operation in 2002. Further growth of gas extraction in the region is expected. According to the estimates of the Ministry of Industry and Power Engineering of Russia, the price of gas in Siberia will reach $36 for 1,000 cubic meters by 2010 (and $44 by 2020); correspondingly, regional authorities predict that production of natural gas in Tomsk may reach 10 billion cubic meters by 2015. Investment and procurement programs of local gas producing company Vostokgazprom JSC and its affiliate Tomskgazprom may provide good opportunities to suppliers of various types of equipment (according to Vostokgasprom’s production program, in 2005 the company invested more than $50 million in gas fields development, $14 million of this sum was spent for the purchase of new equipment).

Siberia, which produces 90% of Russia’s gas, has an undeveloped gas supply and distribution system—the level of gasification of the region is only 5 to 6% (compared to 50% in the central part of Russia). Construction of gas supply networks is currently being conducted in many Siberian territories, including Tomsk region, and business opportunities related to large scale projects and application of advanced solutions in construction of gas distribution networks is presently attract leading engineering companies.

A Program of exploration of hydrocarbons and other mineral resources in Tomsk region was approved by the Federal Agency for Subsoil Use in late 2005; more than half of $28 million planned expenditures is allocated for prospecting of hydrocarbons in the vast northeast territories of the region. Experts and authorities expect that proven information about the size of reserves there will be available by the end of 2006. Complex data on other mineral resources in the region will be compiled by 2010 under this Program.

The Program/Concept of Oil and Gas Industry Development in Tomsk region for the period until 2030, jointly prepared by the authorities and the Institute of Oil and Gas Geology of Siberian Branch of Russian Academy of Sciences, implies that about 384 million tons of oil, 38 million tons of condensate and 342 billion cubic meters of natural gas can be produced in the region within the period 2001-2030. Realization of this concept requires $2.282 billion of investments, including $760 million for exploration.

Great expectations are related to exploration of the large reserves of hydrocarbons forecasted by the geologists on the northeast part of the region (“right bank of the Ob river exploration project”). According to preliminary estimates, the reserves of hydrocarbons there reach 6 trillion cubic meters of natural gas and up to 1 billion tons of oil. Prospecting seismology, drilling of first 1,500 km of prospecting wells, and scientific maintenance of exploration will start in 2006. The prognosis of the regional authorities implies that more than 20 million tons of hydrocarbons will be annually produced in Tomsk region by 2010, compared to 16.8 million tons produced in 2005.

The authorities specially welcome large producers coming into the region, expecting that they will seriously contribute to developing oil-bearing zones on the right bank of the Ob river. Some examples of the arrival of such producers was the recent purchase of oil fields in Tomsk region by Surgutneftegaz and British Imperial Energy. Also, TNK-BP and Turkish National Petroleum Company have recently expressed interest in investment opportunities in Tomsk oil industry. In addition, several medium and small oil producers, including a U.S. company, are working in the region.

Iron ore

Total probable reserve of ore with iron content exceeding 30 percent are estimated at 393 billion tons, which makes Tomsk one of the largest deposits of iron ore in the world. Five ore fields (Bakcharskiy, Kolpashevskiy, Parabelskiy, Chuzikskiy and Parbigskiy) are located in the region.

However, these deposits have been only slightly geologically investigated, and the three-year program of solid minerals extraction development in Tomsk region estimates that 750-800 million rubles (about $28 million) of expenditures is needed for further exploration. In early 2006, a contest for geological survey of Bakchar iron ore field was held; Tomsk company TomGDKruda JSC won the contest and plans to spend around $2 million for further prospecting of the deposit in 2006. Exploitation of 1,200 sq. km Bakchar deposit, containing up to 25 billion tons of ore, is presently considered one of the most important spheres of regional economic development.

One of the few mining areas in the region where high quality ore can be excavated almost from the surface of the Earth, was sold at the auction last October for $115,000; although in the rest of the ore field, the ores lie at 180 meter depth, beneath a marsh, and it is necessary to use modern methods of extraction, like hydromining. Such technologies are not sufficiently developed in Russia yet, and advanced western techniques along with large-scale investments, would be demanded and applied here.

At least five Russian metallurgical enterprises use iron ore, and the reserves of iron ore in Tomsk region would satisfy the needs of developed metallurgical industry of western Siberia for more than 1,000 years. Several gigantic metallurgical enterprises situated in adjacent Kemerovo region consume 30 million tons of ore concentrate per year, and they would likely use most of the output of a concentration plant, because currently the ore is imported from distant Russian regions and even from Australia. India is a country with large own ore reserves, but in 2005 it officially expressed interest in Tomsk iron ore deposit, owing to high quality of Russian iron ore.

Regional authorities and TomGDKruda JSC are currently looking for investors to start construction of sophisticated mining and ore processing facilities. An extraction and enrichment plant with a crushed-ore transporting pipeline that reaches to Tomsk City (about 150 km) is expected to be constructed within the next few years. The total investment required for the first stage of this project is $200 million. An option of constructing a metallurgical combine, similar to the Novokuznetsk and West-Siberian metallurgical combines belonging to Evrazholding, is considered and discussed with potential investors, too. The regional administration would guarantee the investment.

Zinc

Turuntaevskoe zinc ore deposit is situated 65 km from Tomsk City. Total reserve of zinc there is estimated at 560,000 tons, and experts declare this deposit unique because the ore contains zinc solely, without any side products.

Titanium-zirconium deposits

Tuganskoe and adjacent Georgievskoe rutile-ilmenite-zirconium placers are situated about 30 km northeast of Tomsk, almost on the surface, sometimes only several meters deep. This second largest in Russia deposit of titanium and zirconium contains 1,380,000 tons of highly demanded zircon, 3,400,000 tons of ilmenite, 600,000 tons of leucoxene and rutile. Tugan sands are characterized by high content of scandium, tantalum, hafnium and rare-earth elements – lanthanum, cerium, samarium, neodymium, ytterbium and others.

Tugansk ore mining and processing enterprise Ilmenite was founded in September 2002, with the purpose of exploiting the Tugan deposit. Currently, Ilmenite has small-scale pilot facilities situated on the site, licenses, and advanced technology for effective development of the deposit; the company is ready to discuss the issue of investments and business collaboration. Hydrogeological conditions of the site are considered simple, the location is characterized by developed infrastructure, and the deposit is prepared for industrial quarrying. Extraction and enrichment of titanium and rare-earth elements could be coupled with production of ushc byproducts as kaolin, quartz sand, and construction materials.

Precious metals

Although Tomsk region is situated on the edge of traditional gold-mining districts located in Kemerovo region, large deposits of gold have not been confirmed there yet. Fourteen small gold outcrops were found in the south of the region; gold concentration there varies from 1 to 17 grams per ton of rock, and in addition, these ores contain from 1.7 to 2.8 grams of platinum and 0.5 to 6.8 grams of silver per ton. Gold-bearing gravel was also discovered in the alluvial sediments of Tom river. The concentration of gold constitutes around 0.12 g per a cubic meter of rock, which is considered sufficient for industrial production, although in several layers of the deposit the concentration reaches 0.2 to 0.5 g per cubic meter.

Based on the results of prospecting conducted in late 1990s, probable reserves of gold in Tomsk region were estimated equal to 110 tons. In 2004, the Scientific and Production Center for Geological Research of Tomsk Polytechnic University started an investigation of new sites situated in precincts of Tomsk City. Prerequisites for existence of several high-grade deposits were found, the rocks in old chipping quarries and several other sites contain up to 30 grams of gold per ton, while even 5 grams per ton concentration is considered attractive for gold mining. The ground layer there is about 30 meters deep, with ledge rocks containing gold below, so relatively easy accessible ore will most likely be strip mined. Tomsk scientists have already concluded collaboration agreement with western investors and started comprehensive geological survey. The federal government allocated around $1.2 million for the program of further exploration of gold in Tomsk region in the next several years.

Nonmetallics

The region possesses considerable deposits of rock products – kaolin, glass and molding sand, mineral paints, lignite, peat and sapropel. Currently, the reserves of rock products correspond to the following table, published by the Administration of the region:

Table 1

Reserves of rock products in Tomsk region, 2005

	Unit of measurement	A+B+C1 category reserves	C2 category reserves	Off-balance reserves	Number of deposits	Production in 2004
Heat-resistant clays	Thousand tons	25,895	88,896	3421	7	106
Mineral paints	Thousand tons	N/A	22	N/A	1	-
Glass raw stock	Thousand tons	234,746	283,716	N/A	4	-
Stone	Thousand cubic meters	24,095	22,437	N/A	6	2
Gravel	Thousand cubic meters	414,938	1,230	153,543	22	940
Sand	Thousand cubic meters	82,732	-	8,018	13	55
Limestone	Thousand tons	79,824	-	-	2	165

As a result of the national project “Housing” recently launched in Russia, which has spurred the active development of residential and industrial construction in Tomsk (as well as in many other Siberian cities), the deficit of construction and fuel materials in the region has been worsening. At the same time, imports of cement, glass, porcelain and pottery materials, roofing and insulation materials, as well as coal from other regions, have been growing. This is despite the fact that large reserves of rock products could sufficiently supply the growing construction sector and building materials production. The reserves and quality of local sand and gravel are superior to deposits excavated in neighboring regions, but still these products are mainly delivered from Altai, Novosibirsk, and Kemerovo regions.

There is a high and stable demand for flat glass and effective insulation materials in Siberia, and lots of projects related to rock products extraction and their utilization in construction and other branches of industry are being developed. For example, there are several projects of flat glass and bottle glass factories, including a project for a 1.28 million ton per year capacity concrete plant (with by-product manufacturing of colored roof tile, bricks and dry construction blends).

Tomsk Mining and Processing Company (Tomsk GDK), was established in 2001 as the basis for incipient mining complex of Tomsk region, and enjoys official administrative support (51% of Tomsk GDK shares belong to the regional administration). It has several investment projects dealing with extraction of rock products including marbled limestone, sand, gravel and peat, and jadeite stone (applied in jewelry). The company possesses the licenses, business plans, and market research results for each product, and has performed land allotment and received state expertise results. Profitability of the projects reaches 75%, pay-off period ranges from 2 to 7 years. Moreover, the company conducted feasibility studies of zircon and titanium, iron ore and brown coal production and has proposals on joint construction of processing enterprises to manufacture cement, peat and coal fuel bricks, and construction stone.

Lignite

Around 100 outcrops of lignite are known in the region. In 1990, the Talovskoe deposit of brown coal was discovered in southeast part of the region, only 25 to 50 km away from Tomsk city, on the economically developed territory with favorable transportation conditions. Total reserves of lignite there constitute 3,625 million tons, average thickness of the seam equals 3.9 meters on average. Preliminary analysis proved that thermotechnical characteristics of brown coal from Talovskoe deposit allow its utilization in power production, at both large power plants and small boiler units. Besides that, the lignite can be applied in chemical production.

Peat and Sapropel

Around 80% of the region’s north territories and up to 40% of the rest of Tomsk region is covered with marshes. Correspondingly, Tomsk region occupies the second place in Russia by volume of peat resources, with approximately one-sixth of total Russian deposits.

Some 1,500 peat fields with almost 30 billion tons deposit (at 40% moisture) were discovered in the region. However, geological and economical exploration of this resource is still relatively slight. The peat studies are actively conducted in Tomsk – there is a specialized department (successor of Peat Research Institute) in the S&R Institute of Agriculture, and a laboratory of agro-ecology at the Pedagogical University, conducting research of peat properties and applications in competitive products.

Taking into account the complexity of peat excavation and lack of infrastructure development on distant territories, industrial production of peat can be started only by large investors and manufacturers. In 2005, China’s Shenyang Biotechnology Company expressed its intention to invest $50 million in development of Kuludenovskoye peat field situated in Tomsk region, to start production of fertilizers. European companies demonstrate strong interest at present, too.

Sapropel deposits are also large, especially in the lakes situated in the southern part of the region (three largest contain around 20 million tons of sapropel), but no precise estimate of this resource exists.

Subsurface waters

Artesian fresh water is most widely extracted resource in Tomsk region. Its average annual extraction reaches 140 million cubic meters, hence almost 20 times the volume of oil production. Currently, the region’s entire population consumes artesian drinking water, but still less than 1% of subsurface water resources are utilized. It was recently investigated that extraction up to one million cubic meters of pure water daily is possible.

Unlimited resources of mineral waters in the Jurassic, cretaceous and Paleozoic water-bearing strata should be also mentioned. Among them there are sources of healing mineral waters equivalent to famous brands of Matsesta, Yevpatoria, Karachi Lake, etc. Chloride-hydrocarbon sodium, magnesium and calcium, as well as balneal iodine and bromine water sources are actively developed now. Jurassic and Paleozoic water-bearing strata also contain very large deposits of slightly mineralized thermal waters with temperatures ranging from 40 to 140° C.

Hydromineral waters containing saturated solutions of iodine, bromine, lithium, rubidium, potassium, strontium and other elements are still unclaimed, although according to expert estimates probable extractive reserves may annually provide 360 tons of iodine, 5400 tons of bromine, 23000 tons of strontium, and 212 tons of lithium.

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For more information, please contact Mark Shulgov, BISNIS representative in Tomsk, Kemerovo and Irkutsk regions, at email: bisnis-tomsk@mail.ru

Useful contacts and links

Administration of Tomsk region

Mr. Valentin Demidov, Chief of Subsoil Use and Oil and Gas Complex Development Department

Phone: +7-3822-565644; fax: +7-3822-565638

E-mail: nedra-pr@tomsk.gov.ru

Mr. Vladimir Emeshev, Deputy Governor for Prospective Development of Oil and Gas Complex

Phone: +7-3822-510850

E-mail: tolopilo@tomsk.gov.ru

Mr. Alexandr Adam, Chief of Natural Resources and Environment Protection Department

Phone: +7-3822-563661, 563658; fax: +7-3822-563646

E-mail: sec@green.tsu.ru

Ms. Oksana Kozlovskaya, Deputy Governor for Economy and Investments

Tel. reception +7-3822-510564

E-mail: refze@tomsk.gov.ru , forrel@tomsk.gov.ru

Mr. Evgeniy Babushkin, Chief of Investments Department

Tel. +7-3822-510811, fax: +7-3822-510400.

E-mail: babushkin@tomsk.gov.ru

Ms. Nelly Krechetova, Deputy Governor for External Relations

Tel. +7-3822-510939, fax: +7-3822-511199.

E-mail: abra@tomsk.gov.ru

Tomsk Territorial Unit of Federal Agency for Subsoil Use

Mr. Alexandr Komarov, Head

Phone/fax: +7-3822-241864
E-mail: nedra@nedra.tomsk.gov.ru

Tomsk Mining and Processing Co. (Tomskaya Gornodobyvayuschaya Companiya)

http://tomgdk.tomskinvest.ru

or http://tomgdk.narod.ru/3-e.htm (English)

Tugansk Ore Mining and Processing Enterprise Ilmenite

Phone: +7-3822-511335
Fax: +7-3822-511335
E-mail: ilmenit@ilmenit.ru
URL: www.tugan.ru/eng

Vostokgazprom JSC (exploration and production of natural gas)

Phone: +7-3822-612100, 612101
Fax: +7-3822-612244, 612400
www.vostokgazprom.ru (the site contains tender announcements)

Tomskneftegazengineering

(complete of range of services related to oil and gas drilling, engineering and infrastructure development)

Phone: +7-3822-534153; fax: +7-3822-534187

E-mail: tngi@tngi.ru

Tomskaya Neftegazovaya Co. - http://tngk.tomsk.ru

Vostochnaya Transnacionalnaya Co. - www.vtk.ru

Tomsktransgas - www.tomsktransgaz.ru

Tomskburneftegaz - www.tbng.ru

For more information on Siberia, visit BISNIS online at http://bisnis.doc.gov/bisnis/country/siberia.cfm

BISNIS (www.bisnis.doc.gov) is part of the U.S. Commercial Service (www.export.gov).