Russ Oil-Gas

// Gasunie has to expand the assets it will exchange with Gazprom
July 2, 2007 - Kommersant by Natalia Grib, Oleg Gavrish -
Gazprom shareholders have approved a number of agreements on the construction of the Nord Stream natural gas pipeline. The agreement with the last foreign participant in the project, the Dutch Gasunie, is still under discussion, however. Gazprom is not yet satisfied with the share in the Balgzand Bacton Line pipeline that is being offered for entry into Nord Stream. The Russian monopoly wants new assets in exchange – underground gas reservoirs and other pipelines. Analysts suggest that Gasunie may agree to that, and then expand its partnership with Gazprom. On Friday, OAO Gazprom shareholders approved the final agreement between the monopoly, the German E.On Ruhrgas and Wintershall, Nord Stream AG and the Dutch Gasunie for the implementation of the Nord Stream project. Related agreements on compensation for tax payments and taxation in Sweden were also approved. Stanislav Tsygankov, head of the Gazprom department of foreign economic activity, stated that the company plans to sign a number of tax agreements as part of the Nord Stream project, including with Sweden. “One option being considered is the construction of a platform in Sweden. In that case, we will have to pay taxes in that country and an agreement with Sweden will be essential,” he said. The agreement defines the obligations of the parties in the project. In particular, they must contribute €1.5 billion in capital each. If the consortium requires more than €7.377 billion in the construction period, additional contributions will be made will be made to the Nord Stream capital up to 30 percent of the total sum of investment and proportionally to the share of each participant. The participants are guaranteed the repayment of any loans or credits made to Nord Stream AG. They should also guarantee reserve financing, including loans to Nord Stream AG of €3.8 billion. In spite of this, it cannot be said that the structure of the consortium has been finalized. Gazprom deputy supervisory board chairman Alexander Medvedev explained that Gasunie's inclusion in the project will be considered only on July 12. Another Gazprom executive told Kommersant that Gazprom is “discussion the receipt” of a variety of Gasunie assets. N.V. Nederlandse Gasunie specializes in the storage and transport of natural gas. Its pipelines extend 12,000 km. and its underground gas reservoirs have a capacity of 1.1 billion cu. m. It transported 95 billion cu. m. of gas in 2006 and its income exceeded $1.25 billion. The memorandum signed between Gazprom and Gasunie suggests mutual participation in Nord Stream and BBL. The latter is a gas pipeline with a capacity of up to 20 billion cu. m. per year that connects Great Britain and The Netherlands. Gasunie owns 60 percent in it. Under preliminary agreements, Gazprom is to receive about 9 percent in the BBL Co. However, according to a Kommersant source, “while investing in BBL and receiving a fixed income, Gazprom will not receive any preference in transport and the income will be insignificant on the whole.” Therefore, the source continued, the monopoly is discussing a new list of assets for exchange with Gasunie, that is, other transport and storage assets. It was not possible to receive a comment on this information from Gasunie on Friday. The company's press service in The Netherlands and its office in Moscow did not answer their telephones. Alfa Bank expert Konstantin Batunin thinks that the new exchange option can be profitable for Gasunie. “Gazprom is planning to expand most in the retail segment of the market, so it so it may be a matter of providing it with reservoirs and Gasunie shares in distribution pipelines in The Netherlands in exchange for a share in Nord Stream,” Batunin said. BrokerCreditService analyst Maxim Shein noted that, once it has a share in Nord Stream, Gasunie will try to buy resources in Russia to increase the capitalization of the company. Therefore, Shein said, if E.On does not agree to pay about $1 billion to Gazprom for its share in the Yuzhno-Russkoe deposit by the end of the summer, Gasunie will try to take its place.