Fortum could become Gazprom’s partner in gas pipeline venture

Nov 20, 2003 01:00 AM

Russian Prime Minister Mikhail Kasyanov said during his official visit to Finland that the Finnish company Fortum could become Gazprom’s partner in the construction of the North European Gas Pipeline, which will run along the bottom of the Baltic Sea. Meanwhile, the German company Ruhrgas, which was seen as the main candidate for the ambitious project, refused to sign the contract citing dissatisfaction with the marketing strategy.
Analysts admit that Ruhrgas’ European partners will not be in a hurry to invest in the project either, although this would allow them to expand their market share in the future. They will try to persuade Gazprom to make the necessary investments, promising only political support.

Over the past two months, the Russian government has held consultations with the main consumers of Russian gas in Europe -- Germany, France and Italy -- regarding the construction of the North European Gas Pipeline. An alternative offer of cooperation came from the Dutch company Gasunie.Finland’s Fortum became another candidate for the project.
"Work is underway, and at the next stage, we will be able to discuss real investments in the project," Mr Kasyanov remarked. In France, the company Gaz de France is seen as Gazprom’s partner.
"Intensive talks are being held," the Russian Prime Minister said commenting on Russia’s relations with the French company during his visit to France in October. As for Italy, Gazprom plans to cooperate not just with its traditional partner ENI, but also with other, less known companies.

Interestingly, the talks intensified following disagreements between Russia and Germany regarding Ruhrgas’ participation in the project. Speaking at a meeting with Russian and German businessmen in Yekaterinburg last month, President Vladimir Putin expressed hope that an agreement on the construction of the North European Gas Pipeline would be signed "within the next two or three weeks". He made this statement on October 9. The next day, media reports appeared that Ruhrgas was not going to sign the contract.
The company’s spokesman said Ruhrgas was far from making concrete investment decisions. However, a source in Gazprom told: "We have no disagreements with Ruhrgas. There is a misunderstanding about the essence of the agreement." According to the source, there was no agreement as to whether the contract should by approved by the Russian and German governments.
"At this stage, we believe that the project should be approved by government agencies, because it will stimulate investors to take part," he said.

But independent analysts see Ruhrgas' move as its unwillingness to commit itself to the uncertain project. There will be no deficit of natural gas on the European market over the next 5-7 years.
"The need for an additional 40-45 bn cmpy of gas might only arise in Great Britain, but this problem has been solved there," says Vladimir Litvinenko, Rector of the Mining Institute in St Petersburg.
Director of the Russian Gas Society Valery Yazev was more categorical. "There is no need to build the North European Gas Pipeline," he said. According to him, the need for this pipeline will only arise if the large Stockman field is developed. Otherwise, domestic resources will not be sufficient for extending exports.

Ruhrgas’ move was extremely unpleasant for Russia, as well as for German officials. Two weeks later, Gazprom CEO Alexey Miller and the head of Ruhrgas, Burkhard Bergmann, met in Moscow. The businessmen tried to mend the rift, saying that they decided to set up a joint working group, which will focus on the search for a new sales market. The results of the market research are to be announced before the end of November.
"The route of the pipeline and sales on the European market are being considered," a source in Gazprom confirmed. "At this stage, we don’t discuss who will have what shares in the future consortium. And the legal status itself has not yet been chosen," he added. According to some estimates, the negotiations will last for another 1.5-2 years.
"The price of the project tops $ 5 bn, which is not so easy to find. That is why such long terms are justified," an analyst said. Meanwhile, the talks with Ruhrgas’ rivals can be a way of putting pressure on the German company.

Source: The Russia Journal Daily ||LUKoil-Kaliningradmorneft to start satellite monitoring of D-6 field 19-11-03 LUKoil-Kaliningradmorneft plans to launch satellite monitoring of the D-6 field in the Baltic Sea in the first half of 2004, Yuri Kazhdoyan, the company's general director, said. The 24-hour monitoring system will be able to spot the formation of oil stains, their size, speed and direction, he said.
Kazhdoyan said the money for this project would be funded by LUKoil-Kaliningradmorneft.

The D-6 project aims to minimize the harm caused to the environment so a lot of the work has been transferred to land. The D-6 (Kravtsovskoye) oil field was opened in 1983 and is the biggest in Kaliningrad region. The D-6 field is located 23 km off the Curonian Spit and 5 km from the Lithuanian-Russian maritime border.
LUKoil-Kaliningradmorneft holds the license to develop the field. Production is expected to start at the end of 2003-beginning of 2004. Annual output, according to preliminary estimates, is expected to total about 600,000 tons.

Source: Interfax
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