Last updated: November 14, 2012 6:09 pm

Gazprom boosts presence in European gas

Gazprom is set to shore up its influence over European gas markets as part of an asset swap that will see it take full control of gas and trading storage businesses it jointly owns with Germany’s BASF.

BASF’s Wintershall unit will hand over a variety of assets to Gazprom, including its stakes in three European gas trading businesses. One of these, Wingas, supplies gas to almost 20 per cent of the German market.

In return, BASF will receive about a 25 per cent share of two blocks in the Urengoy gasfield in western Siberia, with an option to increase the stake to 50 per cent.

Andrew Benson at Citi Research said: “Gazprom appears to be playing a long-term game of accepting lower gas prices now but agreeing asset swaps for increasing its engagement and influence in European gas markets for its long-term benefit.”

Gazprom, which supplies more than a quarter of Europe’s gas needs, is under pressure because of the US shale gas boom, which has freed rival liquefied natural gas supplies for European customers.

The Russian gas monopoly has been forced to re­negotiate long-term European gas contracts that are linked to the oil price because they are considerably more costly than spot prices for gas.

The proposed deal, which is subject to approval by authorities, may spark political concerns amid lingering worries in Europe caused by a row between Gazprom and Ukraine that disrupted deliveries to Europe in 2006 and 2009.

Separately, the European Commission recently launched a probe into whether Gazprom abused its dominant position in the gas market to thwart competitors and push up prices in central and eastern Europe.

Alexei Miller, Gazprom chief executive, said: “By increasing our share in the gas trading and storage business, we are continuing our successful activities to secure the supply of gas for Europe.”

BASF said the divested activities accounted for €8.6bn in sales and €250m in operating income last year. The chemicals group wants to expand oil and gas production in Russia and the North Sea, and last month agreed to swap assets with Statoil to expand production in Norway.

The two Russian blocks in which BASF has agreed to acquire a share are set to start production in 2016 and are thought to hold 274bn cubic metres of natural gas and 74m metric tonnes of condensate.

Along with Wingas, Gazprom is set to fully control two other gas trading companies: WIEE and WIEH. The three groups together supply customers in Belgium, France, the Netherlands, Denmark, the UK, Austria, the Czech Republic, Romania and Bulgaria.

Gazprom is also set to acquire all of Astora, which operates the largest natural gas storage facility in western Europe, and a 50 per cent stake in Wintershall Noordzee, which has exploration and production activities in the North Sea.

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