Russia's Gazprom Swaps Stakes with BASF, Flexes Muscles in Europe

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Researched by Industrial Info Resources (Sugar Land, Texas)--Russian natural gas monopoly OAO Gazprom (Moscow, Russia) and German chemicals firm BASF (Ludwigshafen, Germany) signed a swap agreement for BASF's 50% stake in its gas trading and storage business subsidiary Wintershall.

BASF SE, the world's biggest chemical maker, also provided a 50% stake in its North Sea exploration and production activities to Gazprom and, in return, will receive a 25% stake, plus a share in two gas fields in Siberian province of Russia.

The Achimov IV and Achimov V fields are already active in the region through an existing joint venture with Gazprom. According to a statement from Gazprom, these fields contain an estimated 274 billion cubic meters of natural gas and 74 million tons of condensate. This is equivalent to 2.4 billion barrels of oil.

The Wintershall's storage units are located in Germany and Austria. Both parties will not change cash for the swap transaction, which will be finalized at the end of 2013

"The swap agreement is consistent with our strategy to expand E&P of crude oil and gas," Kurt Bock, CEO of BASF, said in a statement. "Gazprom will become more active in the natural gas trading and storage business, and we will jointly expand the production at the source."

"By increasing our share in the gas trading and storage business, we are continuing our successful activities to secure the supply of gas for Europe," Alexei Miller, CEO of OAO Gazprom, said in a statement.

Gazprom aims to use underground storage in Europe in case of cold snaps, after the gas exporter rejected requests from European partners to raise supplies early this year. Gazprom supplies more than a 25% of Europe's gas needs.

In late October, the European Commission launched a probe into whether Gazprom abused its dominant position in the gas market to block competitors and push up prices in Europe.

Currently, Gazprom is working to establish the South Stream Pipeline project, which will cost the company $20.5 billion. The project will ship gas directly from Russia to Southern Europe under the Black Sea, bypassing Ukraine. The company aims for this pipeline to become operational by 2015, when it will deliver 63 billion cubic meters of gas a year, which would represent 14% of European consumption. For more information, see August 29, 2012, article - Bulgaria and Gazprom Sign Construction Protocol for South Stream.

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