Gazprom seeking global deals

Jul 02, 2009 02:00 AM

Gazprom, the Russian company that ships a quarter of Europe's gas, is seeking supply deals in the Caspian, Africa and around the world to anchor its lead in areas where European buyers may turn to rival producers.
"We would like to make the company global in terms of upstream presence," Boris Ivanov, head of Gazprom EP International, said at the Gas Exporting Countries Forum in Doha, Qatar. "We are trying to position Gazprom in the areas where we think we need to be strategically present, like North Africa, West Africa, Latin America and Asia."

Gazprom, the world's largest gas exporter, is facing moves from European Union countries to diversify supplies as nations seek to cut reliance on Russia. By forging partnerships and snapping up production assets in gas-pumping nations, the company can add alternative sources of fuel while stamping out competition for customers in Europe, its biggest export market.
"The criteria are very simple: the availability of hydrocarbon reserves, proximity to the markets where we can bring it and, since our projects are time-consuming and capital-intensive, a friendly relationship with the host governments," Ivanov said on June 30.

Gazprom held talks in Algeria in May on developing the trans-Saharan pipeline from Nigeria, where it has agreed to bid for gas fields through a new joint venture and build a link to the north of the country. In the Caspian region, Gazprom signed a "milestone" deal to buy gas from Azerbaijan, threatening European plans to add the country as a source of supply.
"Russia/Gazprom is now involved in all of the major gas- producing countries that can supply Europe," Chris Weafer, chief strategist at Uralsib, said. "In political terms the Iron Curtain is gone. In energy terms, it is being replaced with a Gazprom gas grid that may stretch unbroken from Nigeria via North Africa, the Gulf and Central Asia all the way to the Arctic Circle."

Russia, holder of the world's largest gas reserves and a recent entrant to the market for liquefied natural gas, met fellow members of the Gas Exporting Countries Forum in Doha to discuss a joint budget and appoint senior officials. Consuming countries have voiced concern that the forum's members will club together to decide investment and output, modelling the group on the Organization of Petroleum Exporting Countries.
A "gas OPEC" would be the "final part of that jigsaw," Weafer said, referring to state-owned Gazprom's plan to have a role in all the biggest gas-producing nations. Russia has said the aim of the gas exporters group isn't to fix prices.

Reciprocal deals
Russia has been able to use access to its own ample hydrocarbon resources as a negotiating tool in talks with governments and energy producers overseas. Deputy Prime Minister Igor Sechin said June 19 that foreign oil producers seeking to operate in Russia should offer Russian companies participation in projects abroad in exchange.
The following week, the government invited Royal Dutch Shell, the European oil producer that operates from Canada to West Africa, to cooperate in developing Gazprom's Sakhalin-III and Sakhalin-IV offshore deposits in the Russian Far East.

"Russia is bartering with Shell to get into its existing Nigeria business and ramp up Africa quickly," Weafer said. "Sakhalin-III and IV are signs of goodwill."
Gazprom is also contending with competition from producers of liquefied natural gas, a business untapped by the Moscow-based company until this year, as a gas surplus in the US forces LNG exporters to seek EU markets for their fuel.

Trinidad and Tobago
Trinidad and Tobago has said it reduced its proportion of LNG shipments to the US to 39 % this year from 69 % in 2008 as a result of falling prices there. Exports to Europe from the Caribbean nation grew 50 % in the first quarter from a year earlier, according to International Energy Agency data. The increase in Europe-bound cargoes followed a payment dispute between Russia and Ukraine in January that cut supplies through that country for two weeks and prompted calls in the EU for swifter diversification of energy routes.
The growth in US gas supply has been led by so-called unconventional resources, fuel that's difficult and costly to extract. Rising production of gas from shale, for example, has reduced US dependence on LNG imports, leaving Trinidad and Tobago looking for alternative markets, Energy Minister Conrad Enill told at the Gas Exporting Countries Forum.

Qatari expansion
Qatar, the world's biggest producer of LNG, is also encroaching on Gazprom's traditional markets. The Persian Gulf state, poised to more than double LNG output to 77 mm tons by 2011, has signed its first accord to ship the fuel to Eastern Europe, which depends on Gazprom for most of its gas supply.
Qatar signed a contract now to send 1 mm tons of LNG to Poland, which gets more than two-thirds of its gas from the former Soviet Union. Qatar will deliver the LNG, or gas that's been cooled to a liquid for shipment by tanker, by 2014.

Gazprom's Ivanov dismissed suggestions that an increase of suppliers may threaten the company's position in Europe.
"In terms of the European market, the more real suppliers that are present on the market -- not the brokers, not the mediators -- companies and countries with equity gas, the more stable the market is," he said. "LNG, of which Qatar has plenty and is planning to increase production, is an important part of the energy balance in Europe. We don't think of it as a threat or hostile."

Gazprom in February entered the increasingly global market for LNG by opening Russia's first liquefaction plant on Sakhalin-Island, in partnership with Shell.
Prime Minister Vladimir Putin on June 27 invited The Hague-based Shell to participate in the Sakhalin-III oil and gas venture and also plans LNG projects in the Arctic Yamal peninsula with the Anglo-Dutch company.

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