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Thursday, June 22, 2006

Gazprom eyes access to Chinese gas distribution market

MOSCOW. June 22 (Interfax) - Russian gas giant OAO Gazprom (RTS: GAZP) is holding talks to receive access to the gas distribution market in China, company Deputy CEO Alexander Medvedev said at a press briefing on Thursday. He said that possible ways to enter the market include acquiring a gas distribution company or setting up joint ventures with Chinese companies. He said that at the moment negotiations are underway with several large Chinese partners. But first an understanding should be reached on the price for gas supplies to China, he said. Medvedev said that at the moment Gazprom is actively working on the issue of supplying gas to the Chinese markets by two routes - a pipeline from Western Siberia and another from Eastern Siberia. The volume of gas supplied will depend on the price. "We are calculating what price level is acceptable for us, so as to implement projects to build the pipelines to China on time," he said. However, he refused to say what this price level is. Medvedev also said that an intergovernmental agreement between Russia and South Korea on cooperation in the sector should be signed at the end of 2006. He said that Gazprom is also considering joining Sakhalin projects: including existing projects and projects to develop fields the rights to which have not yet been distributed. Commenting on the possibility of competition for Russian gas in China, in light of plans to supply gas to China from Turkmenistan and Kazakhstan, Medvedev said: "To supply gas under long-term contracts, it is necessary to have it." Medvedev refused to say what production center in Eastern Siberia and the Far East would be the main source for supplies to countries in the Asia-Pacific region until a program to set up a unified gas supply system in Eastern Siberia and the Far East has been approved, taking possible exports to countries in the Asia-Pacific region into consideration. Speaking about the possibility of Gazprom joining the Sakhalin-2 project, Medvedev said that Sakhalin-2 gas has already been contracted, but only for the first phase of the project, therefore if Gazprom joins the project it could take part in exporting gas from other phases of this project. He also said that gas from other Sakhalin sections could provide an additional resource base for the Sakhalin-2 project.

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