Russ Oil-Gas

05-19-2006 The New York Times - by Paul Miller - BRUSSELS, May 18 — An American-based energy company, Moncrief Oil International, is threatening to sue two German companies, contending that an agreement they signed with the Russian giant Gazprom interfered with Moncrief's existing contracts to develop natural gas fields in western Siberia. Moncrief — a privately owned, family-founded business in Fort Worth — has sent letters to the German companies, E.On and Wintershall, a gas-distribution unit of the German chemical group BASF, informing them of its plans to take legal action in the German courts, Moncrief's president, Jeffrey Miller, said Thursday in a telephone interview. The threat of the suit in a German court is the latest twist in Moncrief's efforts to get Gazprom to comply with an agreement in 1997 that gave it a 40 percent stake in the Yuzhno-Russkoye field. Moncrief contends that Gazprom has ignored the agreement and is selling stakes in the natural gas field to other companies, including the 40 percent stake Moncrief says it owns. In a statement issued after the letter to Wintershall was sent, the company's chairman, Richard W. Moncrief, said, "While Moncrief has delivered on its side of the deal, Gazprom has not honored its signed agreement with Moncrief, instead choosing to sell a stake in the field to BASF, and perhaps E.On." Late last month, Gazprom signed an agreement that gave Wintershall a 35 percent stake in the Yuzhno-Russkoye field in return for an increased stake in Wingas, a joint venture involving Gazprom and BASF. Gazprom currently owns 35 percent of the joint venture. But under the agreement signed last month in the Siberian city of Tomsk and witnessed by President Vladimir V. Putin of Russia and Chancellor Angela Merkel of Germany, Gazprom's stake in Wingas will rise to just under 50 percent. Gazprom is also poised to sign a similar development deal with E.On. "Their discussions are advancing," Mr. Moncrief said. "The letter to E.On is pre-emptive and assumes that it will strike a similar deal with Gazprom to the one signed last month. "Both BASF and E.On were informed by Moncrief of its prior interest in the Y.-R. field in 2005 when the first reports of a deal with Gazprom were emerging, and again in March this year — we still received no response. Certainly no one has ever denied the existence of our prior interest." A Wintershall spokesman, Stefan Leunig, refused to "comment on the validity of Moncrief's claim." Mr. Leunig said he did not expect the threat of legal action from Moncrief to affect the deal it signed with Gazprom last month, adding that his company's lawyers "do not recognize any legal foundation for a lawsuit by Moncrief against BASF-Wintershall in a court in Germany." E.On could not be reached for comment. Mr. Miller said he was confident that his company had grounds to sue. "Wintershall and E.On both know that their interest in the Y.-R. field interferes with Moncrief's contracts," he said, adding, "We value our 40 percent stake in Yuzhno-Russkoye at around $8 billion." Moncrief agreed to invest $800 million to $1 billion in the gas field, which it estimates contains 600 billion cubic meters of natural gas deposits. Mr. Miller said it had spent $10 million to $15 million on engineering and financing connected with the gas field. Moncrief tried to sue Gazprom in Federal District Court in Fort Worth, but the court ruled that the case fell outside its jurisdiction. Moncrief is appealing that decision. In the meantime, rather than pursue Gazprom on its home territory, Mr. Miller said his company stood a better chance of fair treatment in Germany. "We don't think we'll get a fair trial in Russia," he said. Michael Emerson, a specialist in European energy matters with the Center for European Policy Studies in Brussels, an independent research group, said Gazprom had reasons for extending its distribution reach further into Europe. In addition to selling in lucrative European markets, the company is trying to thwart efforts to establish a new pipeline bringing gas from Turkmenistan to Europe through Turkey. Pressure to create such a pipeline mounted after gas supplies from Russia were cut to countries including Ukraine this past winter. "Gazprom doesn't want this alternative supply route," Mr. Emerson said. "By consolidating its stake in E.On and BASF, Gazprom will gain a voice in all the strategic investment issues, and will be better placed to persuade European companies not to invest in a competing route."