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Gazprom Can’t Wait to Get to the UK
// Gazprom has given away 9 percent in the Nord Stream project to the right people
Dutch Gasunie is to get 9 percent in the North European Gas Pipeline, becoming the third and the last foreign partner of Gazprom in the project. In exchange, Gasunie will sell 9 percent in Balgzand Bacton Line. The deal is to boost Gazprom’s standing in Europe and give it another chance to enter the British gas market.
Gazprom CEO Alexey Miller and Gasunie President Marcel Kramer signed a memorandum Thursday on the companies’ joint participation in the Nord Stream (North European Gas Pipeline) and Balgzand Bacton Line (BBL) projects. Gasunie is to become the last new shareholder in Nord Stream, a source of Kommersant at Gazprom reported. Russia’s gas monopolist will hold 51 percent of stocks in the project, E.ON and BASF will keep 20 percent each while Gasunie will get a 9 percent share. Buying a share in Nord Stream, the Dutch are giving 9 percent in the BBL project to Gazprom. Gasunie, however, was unable to say yesterday if Gazprom would be able to join the BBL project as early as in 2007. The two projects are priced quite differently. Nord Stream is estimated at ˆ5 billion whereas BBL is reportedly worth ˆ600 million. Therefore, Gasunie will have to pay extra $450 million or provide Gazprom with the access to its transportation facilities on the EU markets.
Gasunie’s share in Nord Stream gives the project political support of Western Europe, Valery Nesterov, an analyst at Troika Dialog, says. There has recently been a lot of rumor that the project may be frozen after environmental expertise in EU countries. Now the EU may slacken its political pressure on Gazprom, Valery Nestrov believes.
Gas goes from Norway via the Netherlands to other EU countries. In addition, two regasification terminals are now being built in the country to receive liquefied natural gas. The Netherlands is eager to act as the gas crossroads and center for natural resources pricing, therefore Gazprom’s presence in the country will help it influence these processes, says Tatyana Mitrova, head of the Center for World Energy Markets Research at the Institute of Energy Research, the Russian Academy of Sciences.
With a share in Nord Stream Gasunie will also secure gas for its export contracts as production at its major deposits is dwindling. Industry experts say that a share in Nord Stream may encourage the Dutch to buy extra gas from Gazexport.
Striking a deal with Gasunine, Gazprom is trying to gain the direct access to customers in the EU market, Konstantin Batunin, an analyst at Alfa Bank, points out. Dmitry Mangilev from Prospekt adds that Gazprom’s share in BBL will help it save money and give up the idea of building Nord Stream from the Netherlands up to the UK. Instead, the Russians will be able to use Norwegian and Dutch gas systems to enter this market. Vitaly Vasilev, head of Gasprom Marketing & Trading (Gazprom’s UK-based subsidiary) told Kommersant several months ago that the gas giant will need to provide the supply of 3 up to 7 billion cu. meters of gas, including 5 billion cu. meters in the Interconnector line and 2 billion cu. meters, contracted by Wingas in BBL if it wants to gain 10-15 percent share in the British market.
Dutch BBL Company is now in the final stage of the construction of the BBL pipeline (to be ready by December 1). The gas main with the capacity of 20 billion cu. meters is to stretch from the Netherlands to the United Kingdom. BBL Company is owned by Gasunie (60 percent stake), E.ON Ruhrgas (20 percent) and Fluxys (20 percent). After the deal with Gazprom, Gasunie’s share will shrink to 51 percent. Along with the stake in the Nord Stream project, the Dutch will also receive 9 percent in Nord Stream AG, responsible for the construction and operation of the North European Pipeline with the capacity of 55 billion cu. meters. Gazprom has 51 percent in Nord Stream; BASF and E.ON hold 24.5 percent each.
Alexey Gromov, head of the Gas Industry Research at the Institute for Natural Monopolies Issues compared the deal with Gazprom getting a pass for the British gas market. “After the deal to takeover British Centrica fell through, the Gasunie option was nearly the last chance for Gazprom to gain a footing on the UK wholesale gas market as well as in the industry of distributing gas to ultimate customers,” Alexey Gromov said. However, Kakha Kiknavelidze at UBS calls Gazprom’s plans to gain 10 percent of the British market “too ambitious” and doubts that the BBL and Interconnector pipelines will be enough to make these plans come true.
Nataliya Grib
All the Article in Russian as of Oct. 06, 2006
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