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Monday, April 13, 2009

Gazprom purchases 20% stake in Gazprom Neft

Apr.11, 2009 - OGJ by Uchenna Izundu - LONDON, Eni SPA has agreed to sell a 20% stake in JSC Gazprom Neft, the Russian oil company, to OAO Gazprom for $4.2 billion under a cooperation agreement signed in Moscow on Apr. 7. The deal means that Gazprom's share in the company will rise to 95.68%. Gazprom Neft, Gazprom's oil subsidiary, is viewed as an asset Russia was reluctant to relinquish. Paolo Scaroni, chief executive of Eni, said to reporters in Moscow: "We purchased these shares at an auction for $3.7 billion. We had to repay a loan for 2 years at 9.4%/annum and pay dividends." He added that the $4.2 billion spent on the asset is the same sum paid by Gazprom to repurchase the 20% stake. Gazprom said it would finance the purchase through loans from a number of Russian banks, but analysts expressed surprise at the timing of the deal when companies are looking to slash spending amid the global recession. Gazprom is struggling with the fall in gas demand in Europe—it expects exports to drop by 22% this year to 140 billion cu m this year. In 2009 gas will be sold at a projected price of $260/thousand cu m (Mcm) compared with an earlier forecast of $280/Mcm: Europe accounts for 60% of the company's revenues. Eni bought the interest in Gazprom Neft at auction in 2007 after Yukos, which had owned the asset, was broken up. Eni will use the funds raised from the deal to reduce its debt and has denied being squeezed out of Russia, focusing instead on other cooperation agreements signed with Russian energy companies. Eni and Gazprom also signed other cooperation agreements; both have committed to jointly develop energy projects in and outside of Russia. Eni said the partnership would conform with the principle of reciprocity, in line with Russia's new energy policy. Gazprom has also acquired extra time to implement its option to buy by May 30, a 51% stake in SeverEnergy, a consortium of Enel and Eni. SeverEnergy was formerly known as EniNeftegaz. Gazprom said that during the meeting, the companies focused on the preinvestment stage of the South Stream project and to the development of interaction through joint gas and power energy projects in Italy, Russia, and third countries. The pipeline is expected to deliver 30 billion cu m/year of Russian gas to the European Union via the Black Sea. Eni has forged ties with other Russian energy companies that will enhance Europe's energy security: electricity supplier Inter Rao UES OJSC, Rosneft, OAO Transneft, and Stroytransgas. Enipower and Inter Rao UES signed an agreement to evaluate joint projects in Russia and abroad. Eni and Rosneft will cooperate on upstream and refining activities in Russia and abroad under a protocol. Italy is the third largest importer of Russian gas in Europe. In 2008, Gazprom exported more than 22 billion cu m of gas to Italy. By 2010, Italy expects to import 3 billion cu m/year.

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