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Sunday, April 30, 2006

Putin and Merkel's Market Relationship

04–28–2006 Kommersant – Russian President Vladimir Putin spent the day yesterday with the chancellor of Germany. He told German Chancellor Angela Merkel everything about Russian gas, about what Gazprom partners could expect to receive in Russia and about why the company has begun looking for mew markets. Kommersant special correspondent Andrey Kolesnikov thinks that Merkel left Tomsk enchanted by the Russian president. The first negotiations between the leaders took place late the day before yesterday. The next morning, the signing of an agreement on the mutual exchange of assets between Gazprom and German chemicals giant BASF was announced. Gazprom will thereby increase its share in the Russian-German Wingas to 50 percent minus one share, while BASF/Wintershall will receive 25 percent minus one share and 10 percent of the non-voting stock in Severneftegazprom. Thus BASF/Wintershall will own 35 percent minus one stock in the South Russian gas condensate field. In addition, Gazprom and BASF will set up a joint enterprise for trading in natural gas on the European market. Gazprom did not sign any agreement with the German E.ON. "The time has passed when we agreed to sign," Gazprom deputy head Alexander Medvedev said. "It's okay, we'll sign with them." When I observed that the time for the signing had not actually passed but, on the contrary seemed to just be getting ripe, Medvedev explained that they wanted very much to sign an agreement with E.ON, but that company was a more difficult negotiator "because they are our direct competitor and are expecting to receive more than we by definition can give." They have still not agreed on the list of assets to be exchanged between the companies. In addition, Gazprom and E.ON do not agree on their valuations. But, Medvedev thinks, "in three months or so an agreement might still be signed." German and Russian business circles began meetings yesterday in Tomsk. Putin and Merkel arrived together an hour after the meeting started. The Russian president said that trade turnover between the two countries, according to Russian statistics, is up to $33 billion, and according to German statistics €38 billion. He did not say how that huge discrepancy arose or, more importantly, where it went. "Russia is dependably guaranteeing the delivery of energy resources to Europe," he said. No one in the audience has cast doubt on Russian energy deliveries or their dependability. Obviously, Putin still gets nervous abut that whenever he sees European leaders. Putin talked about Russia's stable financial situation and mentioned that the country paid $15 billion to the Paris Club last year. "Germany's share, your share, respected ladies and gentlemen, was more than $6 billion," he said. "And this year we plan to pay the debt to the Paris Club in full." The he turned his attention to Gazprom. "This year, it became the second largest company in its sector after ExxonMobil, and the fourth largest company in the world," he beamed. Merkel had been listening to the Russian president directly, not wearing headphones for a translation. At the mention of Gazprom, she put her headphones on. "Here in Siberia," Putin continued, "20 million tons of oil are produced annually and 21 billion cubic meters of natural gas. And the proven reserves are realizable." Klaus Mangold, chairman of the Eastern Committee of the German Economy, as the president to comment on the law being prepared in Russia to limit foreign participation in strategic sectors of the Russian economy. "Our goal is not to the limit access of foreign investors, but to make the process of participation transparent and to bring it into the realm of civil law," Putin said. "But we are concerned about maintaining state influence in especially large deposits. We have one deposit, for instance, that is comparable to the total reserves of Canada. We intend to do everything necessary so that our partners understand what they can contend for and how they can protect their interests during that process." After consulting with more than ten ministers on each side, the two leaders gave a press conference. Merkel said that all German atomic power plants were to be closed by 2020. Putin recalled in that connection his conversation with Ukrainian President Viktor Yushchenko on the occasion of the latest anniversary of the Chernobyl disaster and criticized the West for promising to help Ukraine recover from the effects of the accident and failing to keep its word. He did not agree with Merkel that atomic power stations should be closed down, however. Modern developments make atomic energy safe," Putin said. "France and the United States have huge, simply huge, plans for building new atomic power plants. It is the cheapest, most ecological and, oddly enough, cleanest energy. A German journalist asked the Russian president how it is to be understood that he at first said that Russia is not being allowed to invest in the West, while an agreement between Gazprom and BASF on exchanging assets was signed in their presence. "Even during the Cold War, during the standoff between the two systems, the Soviet Union guaranteed energy to all its partners in Europe. Day by day, hour by hour!" he answered. "And now we hear about some sort of dependence on Russia. Understand us! Put yourself in our place. What are we supposed to do in these circumstances? We begin to look for other markets." From the emotional and even artistic points of view, blackmail was flawlessly implied in his words. Putin continued with the "latest example" of the Centrico company in Great Britain. "Gazprom didn't even intend to buy that company," he said. "There was just a leak to the press." He added after a short pause, "A leak that Gazprom was thinking about it." Fortunately, President Putin continued, Tony Blair made a statement that, if Gazprom wanted to do it, he, the prime minister of Great Britain, would see to it that there were conditions of fair competition for the purchase of Centrico. Too bad that Gazprom did not intend and does not intend to buy it. "If someone approaches us, it's called investment,' but if we approach someone, it's expansion,'" Putin said.

Saturday, April 29, 2006

Yuzhno Russkoe Field to Become German

50/50 Yuzhno Russkoe field...04-28-2006 Kommersant - Russian gas giant Gazprom will yield to German BASF and E.ON/Ruhrgas the better part of the divided of Sevmorneftegazprom, operator at Yuzhno Russkoe field, but retain control over this company. In return, Gazprom counts on stepping up gas sale to the end consumers of Western Europe. Yesterday, Gazprom CEO Alexey Miller and BASF CEO Juergen Hambrecht signed a framework agreement on exchange of natural gas production and marketing assets in Russia's Siberian city of Tomsk. The signing ceremony was attended by Russia's President Vladimir Putin and German Chancellor Angela Merkel. As agreed, BASF will get 25 percent of common stocks (less a stock) in Sevmorneftegazprom and 10 percent of its preferred stocks, the press service of Gazprom reported. In return, Gazprom's stake in the gas trader of BASF, Wingas, will step up from 35 percent to 50 percent less a stock. As no foreign firm may ever have a parity interest in an energy company of Germany under the antimonopoly laws of the latter, BASF and Gazprom will outsource from Wingas all business conducted outside Germany, creating 50:50 Wingas Europe for this purpose. As to Wingas Deutchland, its profits will be equally shared by Gazprom and BASF with BASF maintaining the majority ownership in it. Moreover, Gazprom will get access to the resource base of Wintershall in Libya, where the company has several concession agreements for gas and oil production. Gazprom will get 50 percent less a stock in one of them, Gazprom representatives explained. Yuzhno Russkoe field has 700 bcm of gas in proven reserves. It is located in Krasnoselkupsky district of Yamal-Nenets Autonomous Area. Once the project capacity is attained, the field will annually yield roughly 25 bcm. The required investments are estimated at €1 billion. The gas produced from the field will be shipped via the North European Gas Pipeline, where Gazprom holds 51 percent and BASF and E.ON have 24.5 percent each. The sources in Gazprom say the agreement with E.ON is likely to be reached in the following three months. E.ON and BASF will hold equal number of voting stocks in Sevmorneftegazprom, Alexander Medvedev, deputy chairman of Gazprom's management committee, made clear yesterday.

BASF,'s Wintershall Buys Gazprom's Gas Field Stake

28.04.2006 11:24 - [] - German chemicals giant BASF has acquired 35% of a natural gas field in Russia from Gazprom, the national gas giant and the biggest gas exporter in the world. BASF's Wintershall unit would acquire 35% minus one share in Severneftegazprom (SNGP), the company that owns the licence to develop the Yuzhno-Russkoye gas field in western Siberia. The deal "contributes to the further development of a stable and reliable partnership" between the two firms, BASF chief executive Juergen Hambrecht said. "This is the first time in contemporary history that Russia has allowed a foreign partner into gas production on a gigantic field, which will be exploited for decades," said Mr Putin on the deal, who currently is meeting with Germany's Chancellor Angela Merkel in Siberia. Germany is Russia's largest trading partner. Total trade between the two nations added up to $50bn in 2005.

Friday, April 28, 2006

Gazprom and BASF agree to swap assets

04-28-2006 RBC News - Russia's gas giant Gazprom and the German chemicals company BASF have signed an asset swap agreement. It was signed following Russian-German consultations in Tomsk today. The ceremony was attended by Russian President Vladimir Putin and German Chancellor Angela Merkel. Gazprom will increase its stake in the joint venture Wingas GmbH from 35 percent to 50 percent minus one share. The Russian gas monopoly will also get a stake in Wintershall AG, a subsidiary of BASF. BASF/Wintershall will get 25 percent minus one voting share and 10 percent of non-voting shares in Severneftegazprom, which holds a license for geological exploration and development of the Yuzhno-Russkoye field. In total, BASF will have 35 percent minus one share in the Yuzhno-Russkoye field. Gazprom and BASF will also create the joint venture Wingas Europe for selling natural gas in Europe. The agreements were a sign of growing confidence between Russia and Germany, and they would strengthen ties between Gazprom and BASF, stressed Jurgen Hambrecht, Chairman of the Board of Executive Directors of BASF. Gazprom CEO Alexei Miller described the asset swap as mutually beneficial and meeting the two companies' strategic interests. All the necessary documents had already been prepared, and they would be signed before the end of this year, Miller said. In September 2005 Gazprom, BASF and E.ON signed an agreement in principle on the construction of the North European Gas Pipeline. The first section of the pipeline with a capacity of 27.5 billion cubic meters a year, will be put into service in 2010. The second section will be completed by 2013, bringing the capacity of the pipeline to 55 billion cubic meters. The North European Gas Pipeline Company (NEGPC) will oversee the construction. It was set up by Gazprom, which has a 51 percent stake in it, and German's E.ON and BASF, with 24.5 percent each. The Yuzhno-Russkoye field, located in the Yamalo-Nenetsk Autonomous District, plays an important role in the NEGP project.

Thursday, April 27, 2006

Gazprom: We Have Great Watch List

27.04.2006 10:55 [] - Russian gas monopoly Gazprom is still eyeing the UK energy company Centrica as a potential takeover target. The possibility of a deal has raised fears in the UK over the security of gas supplies.The admission came as a Financial Times report said the UK Government had ruled out blocking any potential bid for Centrica from the Russian group. In an interview with BBC World, the deputy chairman of the Gazprom board, Alexander Medvedev, admitted Centrica was on its list of potential takeover targets. "Centrica is considered as one of our potential acquisitions but it's very difficult to find a company that is not on our watch list," he said, explaining that Gazprom is planning to turn into a "leading energy company" by taking up stakes in European power stations.

Wednesday, April 26, 2006

Gazprom not seeking world monopoly - Kremlin aide

PARIS, April 26 (RIA Novosti, Andrei Nizamutdinov) - Russia is not interested in seeing energy giant Gazprom monopolize the world market, but does want to see it form partnerships with companies from other countries, a presidential aide said Wednesday. Igor Shuvalov, on a European tour as chairman of an interagency commission on Russia's G8 membership, said the perception that Gazprom's negotiations with foreign companies represented an attempt to create an international gas producers association under Russia's control was incorrect. "In our logic, Gazprom should emerge as a global energy company, forming partnerships with major oil and gas companies throughout the world," Shuvalov told a meeting with members of the French Association of Diplomatic Press in Paris. Shuvalov's comments came in response to widespread concern that Gazprom wanted to dominate the European gas market, and specifically over its plans to acquire Centrica, the U.K.'s largest gas distribution company. He said Russia had never planned "for Gazprom to take over the gas industry in Algeria or Qatar or anywhere else and become a worldwide monopoly." "Gazprom should influence the global gas market - not, however, on its own but together with partners in other countries," Shuvalov said. "Our objective is not an association of gas producers, but a closely interconnected and mixed asset-management system whereby both consumers and producers are part of an integrated business structure," he said, adding that unless that happened "there will be no energy security." Energy security is a top issue currently for Russia, which has named it as its No. 1 topic for this summer's G8 meeting in St. Petersburg. Talking about Gazprom's practical steps, Shuvalov said: "The Germans have put forward initiatives that will link the German and the Russian markets." He also said negotiations are under way with U.S. companies on supplies of liquefied natural gas, and French companies were "also greatly interested in forming a partnership with Gazprom as soon as possible." "We hope that the world's major oil and gas corporations will be buying Gazprom shares and influencing the company's policy," Shuvalov said, adding that restrictions on the circulation of Gazprom shares had been lifted. Gazprom's capitalization has been steadily rising since the government removed the "ring fence" from around the company that had prevented foreigners from owning its common stock. Deputy board chairman Alexander Medvedev said Tuesday that capitalization currently stood at $240 billion, and would hit $1 trillion in 10-15 years.

'Gazprom Is Good for the World'

April 26, 2006 The Moscow Times - By Aiste Skarzinskaite and Andrew McChesney - LONDON -- Gazprom deputy CEO Alexander Medvedev turned to the Bible on Tuesday to defend the gas giant's policy toward Europe and deride what he called unfounded "hysteria" there. Medvedev's remarks, on the last day of the Russian Economic Forum, echoed the government's insistence that Russia is a reliable global energy partner. The gathering of Russian and foreign investors, however, listened eagerly for any new insights into Russia's energy policy. Jitters about Russian gas have been sweeping Europe since January, when Gazprom briefly cut off gas to Ukraine amid a price dispute. Gas destined for Europe runs in the same pipeline, and several European countries lost their supplies at the same time. Medvedev opened his speech with Easter greetings for all Russian Orthodox believers in the packed hall and an unrelated Bible verse, Matthew 13:9. "He who has ears, let him hear," Medvedev told the startled audience, first in Russian and then, for emphasis, in English. Rehashing earlier Gazprom statements, he then launched into a defense of Gazprom's credentials as a stable supplier and slammed a European Union push to liberalize and deregulate energy markets. He warned that the change would undermine energy security on the continent, not boost it. EU deregulation plans "cannot but arouse serious fears for ... the stability of gas supplies," he said. In touting Gazprom's record as a reliable supplier, Medvedev reeled off a list of figures to demonstrate Gazprom's clout. He noted that its capitalization stood at $240 billion and is likely soon to reach $300 billion On a Side Russian Gas Reliance
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Source: Gazprom
and that it controlled more than a third of the world's gas reserves. Medvedev then flashed a map, titled "Gazprom -- Most Important Gas Supplier," that showed how dependent Europe was on Russian gas. He stressed that 26 percent of all gas used in Europe came from Russia and that most of it was supplied on long-term contracts. President Vladimir Putin has made energy security a priority of Russia's presidency of the Group of Eight this year, but the Ukraine dispute and subsequent developments have raised questions about Russia's commitment to that agenda. Later Monday, he said that if European countries stuck to those contracts, Gazprom's share of Europe's market would climb to 33 percent by 2010 to 2015. "Energy security depends not only upon suppliers but also upon consumers," Medvedev said. In his speech, he also directed criticism at the media. He said Russia delivered its first LNG shipment to Britain last April, but instead of welcoming it, "the British media went into hysteria -- I cannot find a better word." British media reported earlier this year that senior British government officials had held eight meetings on how to block a potential takeover of Centrica, the country's biggest gas supplier, by Gazprom. Medvedev said in a live interview with the BBC's "Hardtalk" from the forum that Gazprom considered Centrica a potential acquisition target but was not in talks with its shareholders or management. He also said Gazprom was considering several expansion options in Europe. "It's hard to find a company we are not interested in," he said to the laughter of the audience. Asked how many companies Gazprom was looking at, he said he did not have enough fingers to count. There are people who want to see a weak Russia and there are those who want to see a strong Russia, and those who want a weak Russia do not like Gazprom, he said. In any case, "Gazprom is good for the world," he said. During his speech, Medvedev stressed that Gazprom remained committed to Europe. "Europe is and will be our biggest market," he said. Medvedev also said Gazprom would pick a fourth partner for the North European Gas Pipeline by July. Ownership of the multibillion-dollar pipeline project, which is being chaired by former German Chancellor Gerhard Schr?der, is currently split between Gazprom (51 percent) and German companies E.On and BASF (24.5 percent each). Medvedev did not say how much the new partner would hold, but he said Gazprom would retain control over the pipeline, which is to send Russian gas under the Baltic Sea to Germany. Directly after Medvedev, Robert Dudley, president and CEO of TNK-BP, approached the lectern to offer assurances of his own. He said Europe had little to fear and that Russia had a proven track record of reliable delivery of energy supplies. He was followed by Chris Finlayson, country chairman for Shell Russia, and he largely said the same thing. Both Dudley and Finlayson painted positive assessments of their companies' operations and mentioned in passing a desire for more transparency in the state's energy policy. Dudley also pointed out a growing urgency for new investment into production. Dudley's comments were in marked contrast to last year, when he sharply criticized the government's path at the forum. At the time, his company was facing a multimillion-dollar back tax claim, an issue that has since been resolved. Alan Johnson, British secretary of state for trade and industry, called on Russia to ratify the Energy Charter and Transit Protocol. "I cannot think of a better signal that Russia could send than by ratifying these two treaties during its G8 presidency," he said. The Energy Charter requires member countries not to interrupt energy flows during disputes and would require Gazprom to negotiate in good faith on allowing other charter signatories access to excess pipeline capacity. The Transit Protocol regulates transit tariffs. Commenting on Russian-British energy ties, he called for Russia to abolish "economic nationalism." "Russia must ensure a level playing field for all energy players," he said.

Russia's Gazprom Threatens to Halt Gas Supplies to Europe

20.04.2006 MosNews - Russia's state-controlled natural gas monopoly Gazprom said on Wednesday, April 19, that if European Union countries continue to block its international ambitions it could redirect gas supplies to other markets. The move comes after the British Financial Times newspaper reported that the British government wanted to legislatively block Gazprom's acquisition of Britain's biggest gas supplier Centrica. In a statement after a meeting between Alexei Miller, Gazprom's chief executive, and EU ambassadors, the company said: "It is necessary to note that attempts to limit Gazprom's activities in the European market and politicize questions of gas supply, which in fact are of an entirely economic nature, will not lead to good results." As MosNews reported earlier this week, the Financial Times learned that the U.K. government had considered changing merger rules to block a potential takeover of Centrica, Britain's biggest gas supplier, by Gazprom. Gazprom's CEO met ambassadors of the 25 EU states in Moscow on Tuesday, April 18, to discuss Gazprom's relations with Europe, and insisted the world's largest gas producer understood its responsibilities as supplier of a quarter of the EU's gas. Wednesday's statement by Gazprom threatened to devote more of the company's supplies to fast-growing markets elsewhere if plans to expand in Europe — where it has ambitions to move into downstream gas distribution — were thwarted. "It should not be forgotten that we are actively familiarizing ourselves with new markets, such as North America and China. Gas producers in central Asia are also paying attention to the Chinese market. This is for a reason: competition for energy resources is growing," it said. Gazprom said that, while it would fulfill its current contracts with European clients, any future relationship with these countries should take into account the Russian company's ambitions to move into the downstream markets. Sergei Kupriyanov, a spokesman for Gazprom, told the Financial Times: "We just want European countries to understand that we have other alternatives in terms of gas sales. We have a fast-growing Chinese market, and a market for liquefied natural gas in the U.S. If the European Union wants our gas, it has to consider our interests as well." Gazprom's threats follow an outline agreement between Russia and China to supply the Chinese market with gas from Western Siberia, which is also the main source of gas for Europe. Given that Gazprom's reserves have been static for the past five years, the supply of gas to China will decrease the volume of gas available to European countries. Gazprom has made no secret of its ambition to supply up to 20 percent of the U.K.'s gas by 2015. Other European countries have also expressed concerns about Gazprom's plans to take a share in their domestic markets. The EU earlier indicated it would be prepared to let Gazprom into its downstream market if Russia were to liberalize access to gas pipelines to other countries and independent producers — a prospect that Gazprom has ruled out.

Gazprom capitalization to hit $1 trln by 2021 - deputy chairman

MOSCOW, April 25 (RIA Novosti) - Gazprom's deputy board chairman said Tuesday the company's market capitalization would rise to $1 trillion in the next 10-15 years, more than four times its current $240 billion. Alexander Medvedev, in London for the Russian Economic Forum, also said a Gazprom bid for Britain's largest gas distributor, Centrica, was possible, and that a third company could be involved in construction of the North European Gas Pipeline (NEGP). "I won't deny that Centrica is seen as a potential acquisition target," he said, but denied that talks are ongoing. Medvedev, who also heads Gazexport, Gazprom's export arm, said the Russian energy giant now ranks sixth by capitalization among the world's largest public companies, and third among publicly traded oil and gas companies. Capitalization has been steadily rising since the government removed the "ring fence" from around the company that had prevented foreigners from owning its common stock. The ambitious NEGP, which will see construction of a major pipeline from northwest Russia to north Germany, could include a third company, Medvedev said - but only if Gazprom maintains its dominant share. "We are not ruling out that a third party could be attracted to this project with Gazprom keeping its share. This decision will be made by July," he said. Gazprom is project manager for the $10.5-billion project, which will eventually see 55 billion cubic meters of Russian natural gas pumped to Germany across the Baltic Sea floor. The company has a 51% stake in the project, with Germany's BASF and E.ON acting as the second partner, each with stakes of 24.5%. Medvedev also slammed the Energy Charter Treaty, designed to regulate free market relations in the energy sector, saying Russia was right not to ratify it. "We heard no comment from the Energy Charter secretariat during the dispute [over gas prices] with Ukraine. This proves that the document was stillborn and does not reflect real market conditions in most of its provisions," he said. Russia has also refused to ratify transit protocol to the charter, on non-discriminatory access for companies and countries to Russian pipelines, primarily the gas pipeline network. Russia says the charter should be amended. All the EU members and 51 other countries have joined the charter since it was adopted in 1991. Seventeen countries and 10 international organizations hold observer status. The United States has not signed the document. Speaking on the sidelines of the forum, Medvedev said Gazprom would retain its monopoly on exports of Russian gas for years to come. "I believe Gazprom's export monopoly will remain [in place] for several decades," he said. "We have enough assets to meet demand from Europe, North America and the Far East."

Gazprombank assets rise 30% in 1Q 2006

MOSCOW, April 26 (RIA Novosti) - Gazprombank, a subsidiary of Russia's natural gas giant Gazprom, said Wednesday its assets rose 30% year on year in the first quarter of 2006 to 479.1 billion rubles (about $17.4 billion). The bank said pre-tax profit had jumped 294% to 6.7 billion rubles (about $243 million) in the reporting period compared with 1.7 billion rubles (about $61 million) in 1Q 2005. The bank's shareholder equity grew 48% to 33.9 billion rubles (about $1.2 billion) against 22.9 billion rubles (about $832 million) in the period last year. The value of the bank's retail deposits declined from 34.4 billion rubles (about $1.25 billion) in the first quarter of 2005 to 32.1 billion rubles (about $1.17 billion) due to changes in the accounting rules formulated by the Central Bank of Russia, the bank said in a statement. Gazprombank earlier said its net profit rose 310% in the first quarter of 2006 to 5.38 billion rubles (about $195 million) from 1.31 billion rubles (about $47.6 million) a year earlier. Gazprombank is one of Russia's largest banks in terms of assets.

Russia's Gazprom eyes British Gas

Gas hobWednesday, 26 April 2006 – BBC News – Russian gas giant Gazprom is eyeing British Gas owner Centrica as a potential takeover target. The monopoly admitted Centrica was a "potential acquisition" in an interview with BBC World news. The possibility of a deal has raised fears over the security of gas supplies in the UK. The admission came as a Financial Times report said the UK Government had ruled out blocking any potential bid for Centrica from the Russian group. Growth plans In an interview with BBC World, the deputy chairman of the Gazprom board, Alexander Medvedev, admitted Centrica was on its list of potential takeover targets. "Centrica is considered as one of our potential acquisitions but it's very difficult to find a company that is not on our watch list," he said. He added the group was planning to transform itself from a gas supplier to a "leading energy company" by taking up stakes in European power stations. "The role of Russian gas will grow, we have enough reserves to supply gas to Europe, the US, China and Korea." According to the FT, Prime Minister Tony Blair has ruled out the possibility of vetoing any bid for Centrica from the Russian firm as he believes the government must stick to its commitment to open up European markets. "Whatever the difficulties and challenges of globalisation, the answers will not be found in the stagnant waters of protectionism," the paper quoted Trade Minister Alan Johnson as saying. Instead the UK's independent competition authorities would look into any such bid a spokesman for the prime minister said. Supply worries In February, the UK government said any Gazprom bid would come under "robust scrutiny" following reports it was considering a bid for Centrica. At the time the government said that the security of UK gas supplies was "paramount". The Russian firm is estimated to control about a third of the world's gas reserves and supplies almost a quarter of Europe's gas. In January it sparked a political storm when it cut supplies to Ukraine in a row over prices. The stoppage had a knock-on effect, hitting supplies to other European countries further down its pipeline.

Gazprom's global ambitions

 ARCHIVES December 2005 - BBC News - by Tristana Moore - Russia's biggest natural gas company Gazprom has ambitious plans for the future, deputy chairman Alexander Medvedev tells BBC News in an interview.
"We would like to transform our company from being the world's leading gas company into a world leading energy company," says Mr Medvedev.
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Gazprom still mulling Centrica purchase - senior official

Gazprom Deputy Chairman Alexander MedvedevLONDON, April 25 (RIA Novosti) - Gazprom Deputy Chairman Alexander Medvedev said Tuesday that the Russian energy giant was still deliberating over the possible purchase of Britain's largest gas distributor, Centrica. "I won't deny that Centrica is seen as a potential acquisition target," he said in an interview with the BBC's Hard Talk program during the Russian Economic Forum in London. But he dismissed media reports that Gazprom, which provides a quarter of Europe's gas, was in talks with Centrica.

Gazprom suggests new company could join European gas pipeline

LONDON, April 25 (RIA Novosti) - A third company could be invited to join a project to build a major gas pipeline stretching from Russia and Europe, a deputy board chairman of Russian energy giant Gazprom said Tuesday. Gazprom is project manager for the $10.5-billion North European Gas Pipeline project that will eventually see 55 billion cubic meters of Russian natural gas pumped to Germany across the Baltic Sea floor. The company has a 51% stake in the project, with Germany's BASF and E.ON acting as the second partner, each with stakes of 24.5%. "We are not ruling out that a third party could be attracted to this project with Gazprom keeping its share," Alexander Medvedev told the Russian Economic Forum in London. "This decision will be made by July." The project construction plan includes two parallel gas pipeline legs, each 750 miles long. The first stage will see construction of one leg with capacity of 27.5 billion cu m, and the second phase will double it. The pipeline, which will bypass transit countries like Ukraine and Poland, is expected to come on stream in 2010. Russian gas currently reaches western Europe by pipelines through Ukraine and Belarus, and anxiety was raised across the continent following January's spat between Russia and Ukraine that saw supplies to the former Soviet republic cut off. Russia says the NEGP will guarantee reliable supplies to European consumers, and reduce dependency on transit countries.

Tuesday, April 25, 2006

Gazprom may cut NEGP construction costs

RBC, 25.04.2006, Moscow 14:05:49.Gazprom is considering the possibility of reducing costs of the construction of an onshore section of the North European Gas Pipeline (NEGP), deputy head of Gazprom's gas transportation, underground storage and utilization department Alexander Shaikhutdinov told journalists today. The engineering council has met already to discuss this issue. However, Shaikhutdinov did not specify the cost reduction techniques the company was planning to apply.

Tuesday, April 18, 2006

Gazprom Is in Search for Own Route to U.K.

April 13, 2006 - The Kommersant - Gazprom has shipped a pilot consignment of LNG to Britain. Until very recently, Russia's gas monopoly has counted on expanding on the U.K. market by delivering LNG to end consumers under long-term contracts. But this scenario faced too many hurdles to overcome. So far, Gazprom has been shipping the gas under long-term contracts. By selling gas to traders, Gazprom was losing a sizeable portion of profits. In 2005, for instance, Gazprom sold 150 bcm of gas to derive $26 billion in export revenues, while German Wintershall generated $8 billion from 20 bcm. Gazprom tested different methods past year. It sold 4 bcm of gas under spot contracts in Britain, Belgium and the Netherlands. Unlike long-term contracts, those deliveries proved extremely advantageous. At times, gas prices skyrocketed to $1,000/ths cub. m on the British market past winter, said Alexander Medvedev, deputy CEO at Gazprom. Gazprom intends to sell 10 bcm of gas in the U.K. by 2010 and win 20 percent of the market by 2015, once the North European Gas Pipeline is put in operation. The extent of spot contracts is yet unclear, but one thing is certain – Gazprom will be shipping gas to Britain with no intermediaries. But there are some difficulties. Member of Gazprom Group, Gazprom Marketing & Trading (GMT) has been seeking the license for fuel deliveries to the U.K. for half a year already and with no result attained so far. Therefore, Gazprom is forced to stick to the substitution procedures in gas deliveries. A few days ago, GMT bought from Gas de France 140 tons of LNG (85 mcm of natural gas) and sold it to BP in the next move. In Gazprom, they say all LNG deals are efficient but decline to specify the yield. Another way is shipping gas to Britain via Germany and the Netherlands. This route was canvassed during yesterday's negotiations of Alexander Medvedev and Dutch Economic Affairs Minister Laurens Jan Brinkhorst. The gas will go via Balgzand Bacton Line (BBL) gas pipeline that is currently constructed. The matter at stake is again the substitution procedures, said a source with Gazprom. Gazprom will ship to local Gasunie up to 3 bcm of gas already in 2007 for its sale in the Netherlands. Gasunie, in return, will deliver the same amount to Britain via BBL.

German Parliament Challenges Schroder

April 2006 – The Kommersant – German Parliament Challenges Schroder Germany’s state loan guarantees can be reviewed Business and Authority The German Bundestag is to review on Wednesday a €900 loan guarantee toGazprom. offered by the government of Chancellor Gerhard Schroder, Suddeutsche Zeitung reported quoting a source at the German governm...
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Gazprom Sorts Out Priorities

April 2006 The Kommersant - by Nataliya Grib - Gazprom has announced the cost of the North European Gas Pipeline project putting it on $12 billion. Thus, the Russian gas monopolist will pay $1.7 billion more for construction of the pipeline than for the first stage of the development of Shtokman gas field. The latter project had been viewed as the company's most expensive one until yesterday. Bogdan Budzulyak, a director at Gazprom's board, announced yesterday that the North European Gas Pipeline project is estimated at $12 billion. Gazprom deputy CEO Alexander Medvedev, in charge of the project, specified the matter. $6 billion is to be spent on the above-ground section while $5.4 billion will go to the underwater part. The company's press service reported that the $6 billion will be spent not only on the laying of the 900-km gas main from Gryazovets to Vyborg but also on "a large-scale development of the United Gas Supply System in North Western Russia." The funds will be shared between the construction of an additional gas main leading to St. Petersburg as well as new pipelines in Yamalo-Nenets Autonomous Areas. The North European project will apparently cost Gazprom more than the first stage of the Shtokman project. Gazprom is to put the total of $8.7 billion in the Shtokman field, $6 billion of which is for the above-ground section while $2.7 is intended for the underwater part. The financing scheme for the North European Gas Pipeline has been patched up after a scandal involving former German Chancellor and the project's new top manager Gerhard Schroder erupted. The former official was accused of p a loan guarantee for Gazprom during his term in office. Gazprom, however, refuted the speculations.

Monday, April 17, 2006

Chevron and Gazprom May Become One of the World's Largest Liquefied Natural Gas Suppliers

John Gass, president of Shevron Global GasApril 2006 The Kommersant The President of Chevron Global Gas hopes for Stockman
Kommersant has learned that the American Chevron sent Gazprom the final version of its proposal for participating in the development of the Stockman natural gas deposit on Monday. Just before that, Kommersant correspondent Mikhail Zygar talked to Chevron Global Gas president John Gass and learned what Chevron hopes to gain from cooperation with Gazprom. What share of Stockman counting on receiving and what is your company prepared to give in return? Negotiations with Gazprom are continuing and we cannot divulge the details of our commercial proposal. Nonetheless, I can say that partnership with Chevron in the field of liquefied natural gas will not only give Gazprom access to one of the biggest target markets, the United States, but will also help it become one of the leaders on the world energy market. To realize the commercial potential of its tremendous existing resource base, Gazprom must take part in all stages of the production and economic chain, from producing gas to supplying it to the end consumer. Gazprom is the world largest company by size of reserves, production and sales of gas. But development has so far come through supplies of natural gas to consumers in Russia, the CIS and Western Europe, since supplies to other countries of the world were naturally held up because of the existing transport infrastructure. Gazprom can change that situation by beginning to produce LNG.
How interesting will you proposal be to Gazprom?
Chevron has a unique capacity to cooperate with Gazprom in creating a profitable global business based on LNG from the Stockman deposit. I am referring to the experience Chevron has with all stages of the LNG economic chain, including production, sea transport, regasification, pipeline transport, storage, trading and sales. We want our partnership relations with Gazprom to develop long with the growth of that business.
In the long-term, Gazprom could receive direct access to the industrial consumers of North America by using our company's broad network of trunk lines and distribution pipelines and storage facilities.
Can Chevron be helpful to Gazprom in developing the Stockman deposit, considering that it is on the continental shelf of the Barents Sea in the Arctic?
We have rich experience with shallow- and deep-water oil and gas production on the se shelf, including in the Arctic. Chevron recently used advanced shelf development technology to set a record for the depth of the drilling of a well at sea. We drilled the well to a total depth of more than 10 km. in seas more than a kilometer deep. We share our experience with our partners and use it in all of our projects to ensure maximal effectiveness and profitability in developing deposits in various countries of the world. That ensures optimal coordination between the transport logistics and sales divisions to take advantage of existing commercial opportunities. In 2005, the Chevron Shipping Co. organized about 2000 tanker voyages with both oil and LNG.
What volume of Russian natural gas is Chevron prepared to buy? Is there a shortage of natural gas in the United States?
In comparison with other fuels, gas consumption is growing worldwide at a rapid pace, about 2 percent per year. The volume of gas consumption in the U.S. today exceeds its domestic production. Last year the share of imported gas was 18.5 percent of the total volume, while it was only 6 percent of the total volume in 2002. The volume of LNG imported to North America is forecast to rise as domestic production stabilizes and then falls as consumption rises, mainly due to electricity generating companies. Research done by the U.S. National Petroleum Council in 2003 indicates that, by 2020, there will be a sixfold increase in the volume of LNG imported to the U.S. Chevron and Gazprom can become one of the world's largest suppliers of LNG, in proportion to its partnership relations at the later stages of the development of the Stockman deposit and the production of LNG, and potentially the largest supplier of LNG on the American market. We are counting on LNG from the Stockman deposit providing about 8 percent of the predicted import to the U.S. at the initial stage.
World natural gas prices are continually rising. What is the price for it on the U.S. domestic market and how will that price change?
As of March 6, prices on spot contracts for supplying gas to the Henry Hub [the transport system on the shore of the Gulf of Mexico that receives gas from 40 deposits] was $227.50 per 1000 cu. m. No one can predict the price dynamics exactly, but based on supply and demand in the U.S., we expect prices to remain on high. The main thing for Chevron is the ability to find and implement LNG projects to ensure good economic indicators for the next 30 years or so. But we understand that, in the course of that time, market prices for gas will fluctuate. The production of LNG is one means of increasing supply and gas from the Stockman deposit can pay an important role in balancing the consumption of fuel.
How does the U.S. plan to meet the growing natural gas shortage if Chevron does not become involved in Stockman?
We have been able to establish beneficial partnership relations with state and private oil and gas companies and other fundamental participants on the oil and gas markets in various countries. In particular, we can use the example of our cooperation with in an independent enterprise with North West Shelf LNG of Australia, which has been producing LNG since 1989. Among recent projects in LNG are ones in Angola and Australia being implemented under Chevron leadership. We are also managing the largest gas reserves in Australia and West Africa. In the long-term, LNG received from these projects will be supplied to the U.S. Irrespective of that, we are interested in developing partnership relations with Gazprom. And we will be happy if Gazprom becomes our partner on the U.S. natural gas market.
How Rich Chevron Is
Chevron is one of the world's largest producers and sellers of natural gas. The company's reserves consist of about 2.38 trillion cu. m. of natural gas. Chevron is one of the three largest producers of natural gas in the American part of the Gulf of Mexico and in the U.S. in general. The company is active in Argentina, Canada Colombia, Denmark, Indonesia, Kazakhstan, Norway, the Philippines, Thailand, Great Britain, the United States, Venezuela and other countries. In 2005, its daily production was greater than 2.5 million barrel of petroleum equivalent. More than 70 percent of that volume was produced outside the U.S. The company is on Gazprom's shortlist for the development of the Stockman deposit.

Moncrief out of Yuzhno-Russkoe Field

04-02-2006 Kommersant - The District Court of Texas has overruled the suit of Moncrief to Russia's gas monopoly Gazprom. Moncrief was seeking to revive its title to 40-percent interest in Yuzhno-Russkoe field (700 bcm of gas) or get remedy of over $3 billion. The Texas Court overruled the suit against Gazprom, its subsidiaries Zapsibgazprom and Severneftegazprom, as well as against German E.ON Ruhrgaz and Wintershall AG on March 21. Moncrief had failed to provide files that would extend the court's authority over Gazprom up to the general jurisdiction, i.e. the proofs that the Texas company had been in regular and long-term contacts with the defendant. The court also declined to try the case under its personal jurisdiction. Yuzhno-Russkoe field, Yamalo-Nenets Autonomous Area, is the core raw base for future deliveries via the North European gas pipeline. Its recoverable reserves are estimated at 700 billion cubic meters of gas, or $7.9 billion in terms of money, according to the experts. Severneftegazprom holds the license for development. Moncrief claimed Zapsibgazprom GD Vladimir Nikiforov and Moncrief President Richard Moncrief sealed an agreement September 17, 1997 to establish a joint venture to develop the field (Zapsibgazprom was the license holder at that time). Under the agreement of November 23, 1998, Moncrief was to get 20 percent in the venture and Zapsibgazprom acquired 50 percent. The stake of 20 percent went to Edison Gas Italy and Itera got the remaining 9 percent. Edison Gas withdrew from the project in February 1999, enabling Moncrief to extend the stake to 40 percent. In 2000, however, Gazprom transferred the Yuzhno-Russkoe license to a new company - Severneftegazprom. Moncrief claims that, in November 2002, it again agreed with Gazprom on creating a joint venture. The negotiations were underway in 2003-2004, but no answer was finally given. In April 2005, Gazprom that denies the mere fact of negotiations with Moncrief sealed a memorandum with German BASF AG for transferring 50 percent less a stock in Severneftegazprom to BASF Wintershall. This agreement prompted Moncrief to claim revival of 40 percent in developing Yuzhno-Russkoe field or the remedy of billion dollars. The 40-percent in Yuzhno-Russkoe may cost $3.17 billion, according to the experts. On a Side

Wintershall Approaches Yuzhno-Russkoe Field

Wintershall (BASF) has elaborated a package of proposals to be offered to Gazprom in an effort to get 25-percent in Yuzhno-Russkoe field, the resource base to ship gas to Europe via the North European Gas Pipeline (NEGP). In addition to extending Gazprom's share in the gas sales venture from 35 percent to 50 percent, Wintershall proposed to Gazprom to take part in exploration and production of gas at the U.K. shelf of the North Sea and in Libya. Gazprom's stake in Wingas will go up to 50 percent less a stock once Wintershall gets the access to developing Yuzhno-Russkoe field, where it is targeted at 25 percent at the minimum. The details are being canvassed with E.ON and other companies, Wintershall CEO Reinier Zwitserloot said yesterday. A venture of Wintershall (65 percent) and Gazprom (35 percent), Wingas sold 21 bcm of gas in Europe past year. Of that amount, Russia's gas accounted for 70 percent and the gas of Norway covered the remainder. Past fall, Wingas sealed a contract with Gazexport under the NEGP project to annually acquire 9 bcm of gas from 2010 to 2020. German power plants are ready to receive 3 bcm and the company is yet to find clients for remaining 6 bcm. Regardless, all retail net of Wingas proved insufficient for winning a share in Yuzhno-Russkoe field, which recoverable reserves are estimated at 700 bcm of gas. According to Zwitserloot, Wintershall yielded to ZMB (Gazprom Group) the 25-percent interest in project, which provides for exploring and developing Emerald field in the U.K. shelf of the North Sea. Emerald has been added to Wintershall's offer to Gazprom, a source with the German company said on condition of anonymity. Gazprom declined to comment yesterday. The negotiations are tough with final agreements to be attained in April, said Alexander Medvedev, member of Gazprom board.

UES wants more certainty from Gazprom

04-15-2006 Analytical department of RIA RosBusinessConsulting - RAO Unified Energy Systems of Russia and Gazprom are said to be close to signing an agreement that would define the amount of gas supplies to RAO UES's power plants. Over the past few years UES has been seeking a long-term agreement on gas, but Gazprom was against. Now, UES's dream could come true as its CEO Anatoly Chubais found support with President Vladimir Putin, who instructed the government to develop measures ensuring long term uninterrupted gas supplies for the electricity network.
The agreement for gas supplies to RAO UES's power plants until 2010 at prices regulated by the Federal Tariff Service sets fuel consumption at levels reported in 2002-2005, or about 102 billion cubic meters, a source in UES told RBC Daily. UES also demands that Gazprom ensure gas supplies from independent suppliers based on contracts between them and UES. In other words, UES insists that the new agreement set timeframes within Gazprom must issue permits to independent producers allowing them access to the pipeline network. The time limits shall be determined before December 1 of the preceding year. UES's position is justified. Recent problems with energy supplies showed power generators' dependence on the gas monopoly. When Gazprom reduced gas supplies for UES's power plants, several independent suppliers agreed to fill the gap. But the gas giant did not hurry to issue permits to them, and it only issued them in late February, when there was no need for them, the source said. Meanwhile, many of UES's power plants had to burn their reserve fuel oil and to buy it later from producers at speculative prices. As a result, fuel costs were RUR 2.5 billion more than planned. The agreement between Gazprom and UES also provides for contracts between UES, Gazprom and its sales division, Mezhregiongaz, on ensuring the needed gas supplies for new gas pipeline facilities put into service in accordance with decisions on their construction made by the federal authorities. These facilities are the Kaliningrad Thermal Power Plant-2, the North-West Thermal Power Plant and the second unit of the Combined Cycle Plant-324 at the reconstructed Ivanovo Hydroelectric Power Plant, Thermal Power Plant-5 of the St. Petersburg electricity company Lenenergo, and four units at several thermal power plants of the Moscow electricity supplier Mosenergo. Gazprom and UES are expected to develop regulations on coordinating their medium-term investment programs. The agreement drafted by UES also implies cooperation in preparing measures to optimize fuel and energy supplies to the regions of Russia, with the goal of reducing the use of gas by electricity generators. Over the past few years, UES has tried to sign such an agreement with Gazprom. "This is very important for us because the industry reform will end in two years, and our subsidiaries could remain face-to-face with the gas monopoly, which would dictate its prices and volumes of supplies to them," the source in UES told RBC Daily. Gazprom has not commented on the issue. This time, UES found support with Russian President Vladimir Putin. After meeting UES CEO Anatoly Chubais, the head-of-state told Prime Minister Mikhail Fradkov to develop, together with UES and Gazprom, a system of measures ensuring "long-term uninterrupted gas supplies for the needs of the electricity industry" by April 1, 2006. Fradkov gave necessary instructions to the Industry and Energy Ministry, the Finance Ministry, the Economy Ministry and the Federal Tariff Service. UES plans to send a draft agreement to Gazprom before the end of this month. Gazprom's reluctance to sign the agreement does not surprise analysts. "This is a very serious problem regarding the increasing imbalance between production, domestic consumption and exports. With current production levels, Russia cannot both boost exports and meet domestic needs for gas," said Natalya Porokhova, head of the Electricity Department at the Institute for Natural Monopoly Problems. If consumption growth remains the same and production drops, Russia could be short of 120 billion cubic meters of gas in 2010. The main consumer of natural gas in Russia is the electricity industry, with its growing power generation sector. "With things as they are, we will have to restrict either exports or domestic consumption," Porokhova warned. As Russia's largest consumer of natural gas, UES is interested in fixed terms of gas supplies. Stanislav Kleshchev, analyst at Financial Bridge, says this would create more certainty for UES in terms of volume and price of supplies. "Gas prices are rising twice as fast as electricity prices. With this agreement, it will be much easier for UES managers to get a permit for tariff increases," he said.

Gazprom and Bulgaria to agree on gas transit fee

RBC, 14.04.2006, Moscow 19:38:31. Gazprom's Deputy CEO Alexander Medvedev and Bulgarian Economy and Energy Minister Roumen Ovcharov discussed the matter of reviewing current terms of transit of Russian natural gas via Bulgaria, the gas concern's press service reported. The parties have reached an understanding to complete as soon as possible the talks to agree on a feasible transit fee and to extend the term of the current transit contract through 2020. The statement reads that the parties also agreed that there was a possibility to boost transit of Russian gas though Bulgaria and increase investment in gas and energy assets. Gazprom is presently Bulgaria's only gas exporter since 1974. The gas holding's exports to the republic amounted to 3.1bn cubic meters in 2005. Bulgaria also transits Russian natural gas to Turkey, Greece and Macedonia under a respective contract effective until 2010.

Gazprom needs larger capitalization for rural gas projects

PETROPAVLOVSK-KAMCHATSKI, April 16 (RIA Novosti, Oksana Guseva) - Russian natural gas giant Gazprom (RTS ticker GAZP) needs to raise its capitalization to develop gas infrastructure in regions, a senior executive said Sunday. Chairman of the Gazprom Board of Directors Dmitry Medvedev said the growth of the company's capitalization would help Gazprom channel some of its revenues into efforts to create a network of gas pipelines, especially in rural areas. "The larger the capitalization of Gazprom, the broader possibilities we have to develop the country's gas infrastructure," said Medvedev who is also the country's first deputy prime minister. Medvedev said the development of the country's gas infrastructure was an important national project that would benefit 11-12 million people living in 53 regions of Russia. "Therefore, we'll be able to improve considerably the life of citizens, especially people living in rural areas. Gas is a new quality of life for rural dwellers enabling them to run their farms, produce agricultural products and simply to live normally," Medvedev said. According to Medvedev, just four or five years ago when Gazprom cost $10 billion no one could believe that the company's capitalization would rise to $230 billion. "Naturally, this is the result of shareholders' consistent work, especially the work of the state as the company's key shareholder," Medvedev said. The first deputy prime minister also said the growth of Gazprom's capitalization would also push up the share prices of other companies, especially high-tech operators.

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