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Monday, October 13, 2008

Gazprom to get foothold in North America

//The Russian gas giant has been offered a stake in Canada’s gas terminal Rabaska
10-13-2008 - RBC News - Gazprom could take part in the construction of Canada’s LNG terminal Rabaska. The Russian gas monopoly was offered a 27 percent stake in the project, announced Jean-Francois Cirelli, Vice Chairman of GDF Suez. According to earlier reports, Gazprom had contracted 100 percent of the new terminal’s capacity for its LNG supplies from the Shtokman field. In this sense, Gazprom is getting a foothold on the North American market, even if the launch of the Shtokman project falls behind schedule. Cirelli said Gazprom could receive 27 percent in the LNG terminal Rabaska in the Canadian province of Quebec. Currently, the project is controlled by French energy giant GDF Suez, natural gas company GazMetro and Enbridge, Canada’s largest gas distribution company. Each of the three companies has a third in Rabaska. Gazprom’s entry into the project would reduce the stakes of the three partners, and Rabaska would be owned on a parity basis, according to Cirelli. He said Gazprom could either buy a stake and supply LNG to the terminal, or alternatively act as a LNG supplier without joining the project. Cirelli refused to specify the price of the offered stake. The Rabaska construction had earlier been estimated at $840 million. LNG would be supplied from several fields, including the Shtokman field, Cirelli noted. Rabaska is to be build by 2014, coinciding with the launch of the Shtokman field. The Canadian project has received the blessing of both national and local authorities. The terminal will be able to receive, store and regasify up to 500 million cubic meters of LNG a day. In May, it was reported that Gazprom’s subsidiary, Gazprom Marketing & Trading USA (GM&T), had contracted 100 percent of Rabaska’s capacity for LNG supplies from the Shtokman field. Deputy CEO Alexander Medvedev said that exporting Shtokman gas to new North American markets was vital for the company, citing the Canadian provinces of Quebec and Ontario as especially attractive. Getting a stake in Rabaska is much more beneficial to Gazprom than simply contracting the terminal for LNG supplies, maintains Pavel Sorokin, an analyst at UniCredit Aton. For Gazprom, the Rabaska project is a guarantee of sales on the North American market, even if the Shtokman launch is delayed. “Perhaps, some European company will also get a stake in a Russian project, in return,” he added. According to Alexander Nazarov, an analyst at IFC Metropol, by acquiring a stake in a terminal which will be fully dependent on Gazprom’s LNG supplies, the Russian gas monopoly obtains a reliable and solvent consumer, with its demand for gas guaranteed to rise. Similarly, the global LNG market is growing rapidly, and the deal could also be of benefit to Canadian consumers, for whom Gazprom is a reliable and long-term gas supplier. Apparently, the Russian gas will be bound for the United States, with its natural gas consumption expected to grow by 1.5 percent annually over the next 20 years, while US domestic production is declining. This means that the United States will have to import more gas, Nazarov says, estimating its gas imports at about 42 million tonnes of LNG by 2010 and some 85 million tonnes by 2020. Once Shtokman comes online, Russian gas supplies to the US will rise significantly, and Gazprom wants to secure enough regasification capacity on the market.

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