Negotiations on the exchange of assets between Gazprom and E.On as part of the project to develop the Yuzhno-Russkoe deposit may fail. The monopoly's management has stated that, if its German partners do not accept their conditions by the end of the summer, they may be excluded from the project. Industry analysts say that the assets offered by E.On are cheaper than the Russian assets, and Gazprom is justified in asking for supplemental payment. If E.On renounces its share in the Yuzhno-Russkoe deposit, it may be offered to the Dutch Gasunie.
Deputy chairman of the Gazprom supervisory board Alexander Medvedev stated yesterday that the company intends to reconsider the conditions for the exchange of assets between E.On as part of the project to develop the Yuzhno-Russkoe deposit.
They may not let the Germans into the Yuznho-Russkoe deposit
“The key question in the negotiations is to what extent the assets that have been proposed correspond to our strategic goals and match our proposal in price,” Medvedev said. He specified that, if the negotiations are not concluded by autumn, the deposit will be launched into industrial exploitation without E.On. “It would be desirable that, if someone joined in the development, that they did so before the launch, not after it,” he noted.
Press secretary of the E.On office in Moscow Sergey Babkin declined to comment on Gazprom's statements. A Kommersant source in E.On confirmed, however, that Gazprom proposed assessing the assets offered for exchange again. “We are still hoping to reach an agreement and overcome the disagreement by the end of August, since this is a very serious project with large income,” the source said.
Last year, Gazprom and the German E.On AG signed a framework agreement on exchanging assets so that the German partner received 25 percent minus one share in the Yuzhno-Russkoe deposit and Gazprom received 50 percent minus one share in the Hungarian E.On Foldgaz Storage and E.On Foldgaz Trade, as well as 25 percent plus one share in the E.On Hungaria gas and electricity company. Another 25 percent of Yuzhno-Russkoe is to go to Wintershall (which is controlled by BASF). Negotiations with Wintershall have been completed, although no agreement has been signed yet.
Industry experts also assess the assets offered by Gazprom as more expensive than the E.On shares in the Hungarian companies. Troika Dialog analyst Valery Nesterov thinks that 25 percent minus one share in Yuzhno-Russkoe costs $1-1.2 billion. The E.On Hungarian assets, in the opinion of Janos Petofi, general director of wholesale gas distributor Magyar GT, cannot cost more than $800 million “considering their degree of wear and low capacity.” Nesterov suggests that the difference in the value of the assets is the source of disagreement between Gazprom and E.On.
Another reason Gazprom considered the transaction with the Hungarian assets insufficient is market conditions for natural gas in Hungary. According to Medvedev, there are “questions concerning the system of subsidizing in Hungary that creates uncertainty in the plan for income receipts and thus the cost of the companies that E.On is proposing.” A Gazprom source told Kommersant that the rules on the market today allow only a small part of all gas to be sold at market prices to industrial users. The rest of the volume has to be sold by the company to the public at lower than market prices.
Nesterov thinks that Gazprom is demanding that the German company make an additional payment for the difference in the value of the assets or else pay for its share in Yuzhno-Russkoe completely with money. “Otherwise Gazprom may give the quarter share in Nord Stream to the Dutch Gasunie, which would agree quickly to Gazprom's conditions,” Nesterov thought. Gazprom spokesman yesterday said that there are no negotiations of that type underway and that the company can develop the deposit without a third partner if need be.
by Oleg Gavrish
Deputy chairman of the Gazprom supervisory board Alexander Medvedev stated yesterday that the company intends to reconsider the conditions for the exchange of assets between E.On as part of the project to develop the Yuzhno-Russkoe deposit.
They may not let the Germans into the Yuznho-Russkoe deposit
“The key question in the negotiations is to what extent the assets that have been proposed correspond to our strategic goals and match our proposal in price,” Medvedev said. He specified that, if the negotiations are not concluded by autumn, the deposit will be launched into industrial exploitation without E.On. “It would be desirable that, if someone joined in the development, that they did so before the launch, not after it,” he noted. Press secretary of the E.On office in Moscow Sergey Babkin declined to comment on Gazprom's statements. A Kommersant source in E.On confirmed, however, that Gazprom proposed assessing the assets offered for exchange again. “We are still hoping to reach an agreement and overcome the disagreement by the end of August, since this is a very serious project with large income,” the source said.
Last year, Gazprom and the German E.On AG signed a framework agreement on exchanging assets so that the German partner received 25 percent minus one share in the Yuzhno-Russkoe deposit and Gazprom received 50 percent minus one share in the Hungarian E.On Foldgaz Storage and E.On Foldgaz Trade, as well as 25 percent plus one share in the E.On Hungaria gas and electricity company. Another 25 percent of Yuzhno-Russkoe is to go to Wintershall (which is controlled by BASF). Negotiations with Wintershall have been completed, although no agreement has been signed yet.
Industry experts also assess the assets offered by Gazprom as more expensive than the E.On shares in the Hungarian companies. Troika Dialog analyst Valery Nesterov thinks that 25 percent minus one share in Yuzhno-Russkoe costs $1-1.2 billion. The E.On Hungarian assets, in the opinion of Janos Petofi, general director of wholesale gas distributor Magyar GT, cannot cost more than $800 million “considering their degree of wear and low capacity.” Nesterov suggests that the difference in the value of the assets is the source of disagreement between Gazprom and E.On.
Another reason Gazprom considered the transaction with the Hungarian assets insufficient is market conditions for natural gas in Hungary. According to Medvedev, there are “questions concerning the system of subsidizing in Hungary that creates uncertainty in the plan for income receipts and thus the cost of the companies that E.On is proposing.” A Gazprom source told Kommersant that the rules on the market today allow only a small part of all gas to be sold at market prices to industrial users. The rest of the volume has to be sold by the company to the public at lower than market prices.
Nesterov thinks that Gazprom is demanding that the German company make an additional payment for the difference in the value of the assets or else pay for its share in Yuzhno-Russkoe completely with money. “Otherwise Gazprom may give the quarter share in Nord Stream to the Dutch Gasunie, which would agree quickly to Gazprom's conditions,” Nesterov thought. Gazprom spokesman yesterday said that there are no negotiations of that type underway and that the company can develop the deposit without a third partner if need be.
by Oleg Gavrish
Gazprom to Dominate EU Spot Contracts
RosUkrEnergo and Gazprom Export are drafting a contract for Gazprom to sell 4 billion cu. meters of gas from the Ukraine-EU border to Europe in spot contracts, a Gazprom official reported Tuesday. Gazprom, which owns 50 percent in the Switzerland-registered RosUkrEnergo, will thus do way with competition in the most profitable though risky contract. However, the Russian gas monopolist may soon come against competition on the EU market with Dmitry Firtash, who holds 45 percent in RosUkrEnergo and whose firms are eyeing Hungary’s Fogaz.
Gazprom Export is to strike a deal with RosUkrEnergo to buy gas from underground storages in Ukraine, Gazprom’s Deputy CEO Alexander Medvedev said Tuesday. RosUkrEnergo said in interview with Kommersant that the parties were still in talks for the purchase.
A Kommersant source informed on the course of the talks said Gazprom was going to buy 4 billion cu. meters of RosUkrEnergo’s gas stored in underground facilities in Ukraine. The price will be close to a market one, the source added.
The deal is also lucrative for RosUkrEnergo as it bought the gas at between $95 and $160/1,000 cu. meters, which means it will reap at least $500.5 million on the deal if the gas is sold at $250. Industry experts predict that Gazprom’s export contract prices will grow to $280/1,000 cu. meters before the end of the year, which will increase RosUkrEnergo’s profit by one-third.
Striking the deal with Gazprom, RosUkrEnergo will lose a chance to work on spot contracts with the European Union, analysts say.
However, interests of Gazprom and RosUkrEnergo may clash again quite soon. Budapest authorities are considering selling 50 percent in the Fogaz gas firm that Russian investors are already eyeing, according to the MTI news agency. A Kommersant source close to Group DF, owned by Dmitry Firtash, confirmed the company’s interest to Fogaz.
Gazprom Stakes on Crude Oil, Cold Weather
Gazprom stakes on improving 2006 record gas export revenues of $37.2 billion.
The analysts regard this intention of gas monopoly too optimistic, especially in light of the 18-percent drop in exports from January to May. Nothing but cold fall, early winter and surge in crude oil prices will help Gazprom materialize its hopes, they speculate.
Natural gas supplies to 22 states broke two records past year – in amount (151.1 billion cu meters) and in revenues ($37.2 billion cu meters), Gazprom Deputy Chief Executive and Gazprom Export CEO Alexander Medvedev announced yesterday. The 2005 indicators were 147 billion cu meters and $26 billion respectively.
Such healthy export revenues could be attributed to the surge in prices for CIS and the European Union. Ukraine, for instance, faced the increase of $55 per thousand cu meters to $95 per thousand cu meters. As to the European Union, the average cost of supplies soared from $230 per thousand cu meters to $260.7 per thousand cu meters.
“There have been no such prices before,” Medvedev said, specifying that own production in the EU is going down, while the market standing of Russia is improving. According to Medvedev, the share of Russia’s gas consumption in Central and Western Europe widened to 27 percent past year, and Russia accounts for 35 percent of global gas imports.
Medvedev vowed to further boost export revenues this year. Indeed, the prices for CIS gas supplies went up again. Ukraine, for instance, has faced the increase to $130 per thousand cu meters, while Belarus has had to yield to paying $100 per thousand cu meters instead of the previous $46.68 per thousand cu meters. But even that growth has failed to inspire the analysts. Gas exports declined 18 percent in January to May due to unusually warm weather, BCS analyst Maxim Shein reminded.
“In Gazprom, they spoke of Europe’s average price of $290 for this year, but so far, we see that, because of the drop in crude oil prices on global markets past fall, the H1 prices for gas contracts were much more moderate than the outlook - $250 percent to 260 percent,” Shein said.
Gazprom to Develop Kovykta Ahead of Schedule
For Kovykta gas condensate field, the production schedule was promptly revised once Gazprom sealed Friday an agreement for the buyout of 62.89 percent in its license holder, RUSIA Petroleum.
Instead of the production startup in 2017, for which Gazprom Deputy Chief Executive Alexander Ananenkov has been pressing over the past seven years, the monopoly is ready to set to selling Kovykta gas in three or four years. “Kovykta has the chance not for some distant but for intense development,” another Deputy Chief Executive of Gazprom Alexander Medvedev announced yesterday.
Kovykta will be developed in line with the Eastern Program, which the government is currently studying for approval, Gazprom representatives explained. The draft of that program spells out scenarios of intense development of Kovykta with the first option providing for gas deliveries to the Unified Gas Supply System and for the sale of 11 billion cu meters of Kovykta gas in the European part of Russia or in the European Union in 2011.
Another scenario omits the Unified Gas Supply System. In this case, the start of production is put off till 2012, the amount is reduced to 6 billion cu meters and the gas will go to the Asian and Pacific region.
Gazprom backs up the second option. “Potential sales markets are China and Korea, the negotiations are underway with both of them,” Medvedev confirmed.
As to Europe, the European Commission hailed the Kovykta agreement of Gazprom and BP yesterday, According to the Energy Commissioner Andris Piebalgs, the agreement will enable to develop Kovykta field and positively affect investment climate in Russia.
RosUkrEnergo and Gazprom Export are drafting a contract for Gazprom to sell 4 billion cu. meters of gas from the Ukraine-EU border to Europe in spot contracts, a Gazprom official reported Tuesday. Gazprom, which owns 50 percent in the Switzerland-registered RosUkrEnergo, will thus do way with competition in the most profitable though risky contract. However, the Russian gas monopolist may soon come against competition on the EU market with Dmitry Firtash, who holds 45 percent in RosUkrEnergo and whose firms are eyeing Hungary’s Fogaz. Gazprom Export is to strike a deal with RosUkrEnergo to buy gas from underground storages in Ukraine, Gazprom’s Deputy CEO Alexander Medvedev said Tuesday. RosUkrEnergo said in interview with Kommersant that the parties were still in talks for the purchase.
A Kommersant source informed on the course of the talks said Gazprom was going to buy 4 billion cu. meters of RosUkrEnergo’s gas stored in underground facilities in Ukraine. The price will be close to a market one, the source added.
The deal is also lucrative for RosUkrEnergo as it bought the gas at between $95 and $160/1,000 cu. meters, which means it will reap at least $500.5 million on the deal if the gas is sold at $250. Industry experts predict that Gazprom’s export contract prices will grow to $280/1,000 cu. meters before the end of the year, which will increase RosUkrEnergo’s profit by one-third.
Striking the deal with Gazprom, RosUkrEnergo will lose a chance to work on spot contracts with the European Union, analysts say.However, interests of Gazprom and RosUkrEnergo may clash again quite soon. Budapest authorities are considering selling 50 percent in the Fogaz gas firm that Russian investors are already eyeing, according to the MTI news agency. A Kommersant source close to Group DF, owned by Dmitry Firtash, confirmed the company’s interest to Fogaz.
Gazprom Stakes on Crude Oil, Cold Weather
Gazprom stakes on improving 2006 record gas export revenues of $37.2 billion.The analysts regard this intention of gas monopoly too optimistic, especially in light of the 18-percent drop in exports from January to May. Nothing but cold fall, early winter and surge in crude oil prices will help Gazprom materialize its hopes, they speculate.
Natural gas supplies to 22 states broke two records past year – in amount (151.1 billion cu meters) and in revenues ($37.2 billion cu meters), Gazprom Deputy Chief Executive and Gazprom Export CEO Alexander Medvedev announced yesterday. The 2005 indicators were 147 billion cu meters and $26 billion respectively.
Such healthy export revenues could be attributed to the surge in prices for CIS and the European Union. Ukraine, for instance, faced the increase of $55 per thousand cu meters to $95 per thousand cu meters. As to the European Union, the average cost of supplies soared from $230 per thousand cu meters to $260.7 per thousand cu meters.
“There have been no such prices before,” Medvedev said, specifying that own production in the EU is going down, while the market standing of Russia is improving. According to Medvedev, the share of Russia’s gas consumption in Central and Western Europe widened to 27 percent past year, and Russia accounts for 35 percent of global gas imports.Medvedev vowed to further boost export revenues this year. Indeed, the prices for CIS gas supplies went up again. Ukraine, for instance, has faced the increase to $130 per thousand cu meters, while Belarus has had to yield to paying $100 per thousand cu meters instead of the previous $46.68 per thousand cu meters. But even that growth has failed to inspire the analysts. Gas exports declined 18 percent in January to May due to unusually warm weather, BCS analyst Maxim Shein reminded.
“In Gazprom, they spoke of Europe’s average price of $290 for this year, but so far, we see that, because of the drop in crude oil prices on global markets past fall, the H1 prices for gas contracts were much more moderate than the outlook - $250 percent to 260 percent,” Shein said.
Gazprom to Develop Kovykta Ahead of Schedule
For Kovykta gas condensate field, the production schedule was promptly revised once Gazprom sealed Friday an agreement for the buyout of 62.89 percent in its license holder, RUSIA Petroleum.
Instead of the production startup in 2017, for which Gazprom Deputy Chief Executive Alexander Ananenkov has been pressing over the past seven years, the monopoly is ready to set to selling Kovykta gas in three or four years. “Kovykta has the chance not for some distant but for intense development,” another Deputy Chief Executive of Gazprom Alexander Medvedev announced yesterday.Kovykta will be developed in line with the Eastern Program, which the government is currently studying for approval, Gazprom representatives explained. The draft of that program spells out scenarios of intense development of Kovykta with the first option providing for gas deliveries to the Unified Gas Supply System and for the sale of 11 billion cu meters of Kovykta gas in the European part of Russia or in the European Union in 2011.
Another scenario omits the Unified Gas Supply System. In this case, the start of production is put off till 2012, the amount is reduced to 6 billion cu meters and the gas will go to the Asian and Pacific region.
Gazprom backs up the second option. “Potential sales markets are China and Korea, the negotiations are underway with both of them,” Medvedev confirmed.As to Europe, the European Commission hailed the Kovykta agreement of Gazprom and BP yesterday, According to the Energy Commissioner Andris Piebalgs, the agreement will enable to develop Kovykta field and positively affect investment climate in Russia.
