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Wednesday, September 06, 2006

Gazprom, Independents to Split Gas Exchange 50-50

September 6, 2006 - Reuters - Prime Minister Mikhail Fradkov has signed a decree setting up an experimental domestic gas exchange for the country's independent gas producers and export monopoly Gazprom, Vedomosti reported Tuesday. The newspaper quoted government officials as saying Gazprom and independent producers would be allowed to sell a total of 10 billion cubic meters of gas on the exchange in 2006-07. Gazprom will provide half of the volume. The decision has been in the works for years as part of a government plan to gradually liberalize domestic gas prices, which are now capped at one-fifth to one-tenth of gas prices in Europe. The volumes sold at the exchange at unregulated prices will represent only 2.5 percent of the gas used by domestic consumers and some 5 percent of Gazprom exports to Europe, which cover one-quarter of the continent's gas needs. The experiment will begin later this year at Gazprom's marketing subsidiary Mezhregiongaz's electronic exchange. Once it is completed and the results have been analyzed, the government will decide whether to proceed and expand gas sales at the exchange. "The development is promising, both for the independents such as Novatek and for Gazprom, with the latter set to gain more should it manage to use the gas exchange as a platform from which to speed up and expand unregulated gas pricing in Russia," brokerage Troika Dialog said.

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