Centrica plans stake in Turkmenistan-Ukraine gas project

Centrica, Britain's biggest gas supplier, is in talks to take a major stake in a multibillion pound project to transport gas from Turkmenistan through Ukraine to Western Europe.
As part of plans under discussion, Centrica would invest some £ 300 mm for a 10 % stake in the estimated £ 3 bn joint-venture project recently set up between Russia and Ukraine.

The move is the latest example of the "dash for gas" by British companies as the UK becomes a net importer. It comes as Centrica revealed for the first time the scale of the investment that Britain must make to secure sufficient energy supplies.
Analysis for Centrica by Oxera, the Oxford-based economic consultancy, estimates that total investment -- in gas pipelines, storage facilities and offshore fields, plus new electricity generation projects -- will need to be between £ 10 bn and £ 18.1 bn from 2005 to 2010. A deal by Centrica to take a stake in the Turkmen gas project is expected to be signed later this year. It is understood that the company's board has yet to formally consider the proposal.

The gas project is being operated by a newly established Russian-Austrian joint venture called RosUkrEnergo (RUE). RUE will be managed by Gazprom, Russia's gas giant, Naftogaz, Ukraine's national gas company, and Austria's Raiffeisenbank, which is looking to sell on part of its 50 % stake.
Gazprom announced the formation of RUE last month. The decision appeared to be a fatal blow to a small Hungarian-based gas trader, Eural Trans Gas (ETG), which had a contract to lease the same pipeline from Gazprom to transport Turkmen gas. ETG is chaired by Cedric Brown, the former CEO of British Gas, which was split into Centrica and BG Group.

In July, Sir Roy Gardner, Centrica's CEO, said the company would spend up to £ 5 bn over the next five years to secure new gas supplies. Centrica signed a 15-year contract worth £ 4 bn with Petronas, the Malaysian state oil and gas company, to import 3 bn cm of LNG a year.
The overall investment needed to address Britain's energy crisis will shock many commentators. Gareth Davies, a managing consultant at Oxera and the report's author, says a large portion of the investment will have to be spent on "transit" infrastructure, such as new interconnectors and LNG terminals. He expects gas imports to account for about 42 % of total supply by 2010 and 66 % by 2020.