02-08-08 Russian gas monopoly Gazprom will buy Turkmen gas at $ 225-$ 295 per 1,000 cm in 2009, a considerable increase from $ 140 this year. It will also issue interest-free loans for several local gas projects to retain control over Turkmen gas.
Two basic gas acquisition agreements were signed during a working visit of Gazprom CEO Alexei Miller to Turkmenistan. They cover gas prices, and stipulate a transition to market principles for pricing under Gazprom's long-term contract with Turkmenistan until 2028. Under the other agreement, the gas monopoly will issue interest-free loans for Turkmen projects.

A high-ranking source told that the agreements stipulate several pricing principles. According to one of them, the price is calculated on the basis of the average European wholesale gas price, domestic Ukrainian prices and prices in southern Russia taken in equal proportions. The other provides for calculating the price on the basis of European and Ukrainian prices taken in equal proportions.
Spending on transportation is detracted from the base price and numerous additional coefficients are added to it, the source said.

Valery Nesterov, an analyst at the Troika Dialog investment company, said: "Gazprom will not lose one way or another, because it will shift additional spending on to Ukraine."
If the price formula includes the low gas prices in southern Russia ($ 70-$ 80 per 1,000 cm), and given the current average gas price of $ 410 in Europe, the purchasing price for Turkmen gas will be $ 225 or $ 295. In the former case, Gazprom will pay $ 9.45 bn more and in the latter case, $ 12.4 bn more for gas in 2009.

Gazprom will also finance and build gas transportation projects and develop gas fields in Turkmenistan.
Miller said: "Under the agreements reached, Gazprom will finance and build main gas pipelines from the country's eastern regions and increase the capacity of the Turkmen part of the Caspian pipeline to 30 bn cm."

The volume of financing has not been reported, but Mikhail Korchemkin, the founder and managing director of the consulting company East European Gas Analysis, said the projects would cost Gazprom $ 4-$ 6 bn. He said the energy giant would have to borrow the money on the market at 6 %-8 % annual interest.
In other words, it will annually provide $ 240-$ 480 mm to Turkmenistan. But this will allow Russia to retain control over Turkmen gas export.

Turkmen President Gurbanguly Berdymukhamedov said during his meeting with Miller that his country was resolved to maintain friendship with Russia. Recalling his meeting with Russian President Dmitry Medvedev on July 4-5, he said: "Gazprom has been Turkmenistan's leading strategic partner."
A top manager from Gazprom told that the talks with Turkmenistan were difficult, and that Gazprom's deputy CEO, Valery Golubev, spent a week there hammering out details of the agreements.

"There were several variants; I don't know which of them they have signed," he said. "The Turkmen partners drove a hard bargain. I think Alexei Miller had to make some concessions in order to buy all of Turkmen gas and honour the political agreements between Russia, Turkmenistan and Ukraine."
This was the third Gazprom visit to Turkmenistan this summer.