Russ Oil-Gas

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

Country	%
Finland	100
Poland	58
Czech Republic	74
Slovakia	97
Hungary	70
Romania	29
Bulgaria	99
Yugoslavia	74
Germany	33
Austria	66
Slovenia	61
Italy	26
Greece	76
Turkey	60
France	26
Netherlands	5
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.