Sample News Story
Gazprom Grows its European Network
28/11/1995
Since we last looked at Gazprom’s network of European shareholdings (see Gas Matters October 1994, pages 14-16), the network has become much larger and more diverse.
Gazprom’s approach At the annual Russian and CIS Gas Conference*, Gazprom foreign relations chief, Nicolai Beliy, listed 24 companies – 10 joint stock companies, 8 joint ventures and 6 trading houses – in which the company has shares. The table on page 21 lists these plus a few which he missed off his list but which merited a mention in the presentation. Gazprom’s approach to these foreign investments is based on four principles:
u establishing a diverse range of new companies: joint ventures, joint stock companies and trading houses (although the difference between these entities was not entirely clear, either in law or in activity).
u establishing direct sales of natural gas to consumers in the markets to which Gazprom exports gas.
u expanding the scope of gas exports beyond traditional sales to traditional customers.
u supplying Gazprom’s enterprises with equipment and other goods (particularly food) through the operation of the trading houses.
Germany Clearly the largest group of investment is in Germany where, in addition to WIEH and Wingas, Gazprom has Ditgas as a barter trade organisation buying equipment for the company and selling Gazprom’s products. Gaza import/export is apparently a spot gas trading house operating within Germany. Turkey In Turkey, Botas is about to take a stake in GAMA Gazprom which may become an extremely important organisation in that country. According to Beliy, GAMA will engage in sales and marketing (particularly to power stations). It will also build pipelines, gas storage and power stations. TUR-GAS is a trading house that will buy consumer goods and food for Gazprom’s staff in Russia.
Italian venture Possibly the most interesting snippet of news concerns Gazprom’s newest foreign venture in Italy with Edison Gas. While Beliy failed to include `Volta’ in his list of joint ventures, the audience had been intrigued to hear Chairman Vyakhirev mention in passing that the new pipeline to Italy would be routed through Slovakia, Hungary and Slovenia (as opposed to the present route through Austria). This seemed a little strange since the feasibility study to determine the best route will not be completed for another five months.
Greece As far as the Greek trading house Prometheus Gas is concerned (it is rather confusing that Gazprom has opened a trading house of the same name in Serbia), we understand that it will cover the areas of gas-fired power generation and storage. That is when Russian gas finally reaches Greece next year, four years late.
Two additional JSCs which Beliy listed were the ‘European-Asian Pipeline Consortium’, where Gazprom holds 7% of the equity with Turkmenistan and Iran, and an insurance JSC ‘SOGAS’. No additional information was given on either of these companies.
What about Austria ? Interestingly, Beliy failed to mention two countries which we have on our list: the Bulgarian joint venture Overgas and trading house TOPENERGY. Despite being announced earlier this year, it may be the that actual constitution of the companies is still at an early stage. Even more interesting was the failure to mention GWH in Austria, which was one of the earliest trading houses to be set up, about which little or nothing has been heard since. It remains on our list, although not apparently on Gazprom’s.
Notable absentees Finally Beliy did note in passing that Gazprom was setting up a company in Slovakia, although he gave no further details. Assuming this is the case, there are two notable absentees from the list:
u the Czech republic, where a huge battle is being fought with the Czech Government completely opposed to any kind of joint venture company. With the need to renegotiate long term contracts the Czechs may seem to be in a weak position, but their role in the transit of Russian gas to Europe greatly strengthens their hand.
u Britain, where a draft agreement was announced by Gazprom and BG for the latter to deliver gas to Germany via the Interconnector on behalf of the Russians. This is an attractive deal for both sides. For Gazprom is provides security of supply for the German market (and potentially other markets), which will be much cheaper than building additional storage. For BG it is a significant start in their marketing campaign on the Continent. Perhaps equally important for BG is that such an arrangement would put the company in the driving seat to become Gazprom’s principal partner in Britain.
* The 4th Annual Conference on: Natural Gas Opportunities in Russia and the CIS, Proceedings from the Royal Institute of International Affairs Conference Department, +44 171 957 5700.