MOSCOW Dec 18 Russia and Germany launched work
on the enormous Yuzhno Russkoye gas field in northwest Siberia
on Tuesday, which will be jointly developed to feed the Nord
Stream gas pipeline from Russia to Western Europe.
Russian gas export monopoly Gazprom (GAZP.MM)'s Chairman of
the Board, Dmitry Medvedev, who is also the formal candidate to
succeed Vladimir Putin as Russian president, CEO Alexei Miller
and German Vice Chancellor Frank-Walter Steinmeier led the
inauguration ceremony in Moscow.
"This project is Russia's contribution to energy security in
Europe," Medvedev said.
In Gazprom's Moscow headquarters, a televised live broadcast
showed the head of Gazprom's unit which is developing the field,
Severneftegazprom, on site in the northern region of Yamal,
speaking in -40 Celsius temperatures surrounded by executives
While Gazprom owns the majority of the project, German
chemical group BASF BASF.DE has a 25 percent stake minus one
share of the field, which has recoverable reserves of 600
billion cubic metres (bcm) of gas and 5 million tonnes of oil.
There is also an option for Germany's largest utility E.ON
EONG.DE, to acquire the remaining 25 percent stake.
"This project represents practical implementation of
Gazprom's principle of cooperation with foreign partners based
on assets swaps," Miller said.
"Realisation of this project will strengthen Gazprom's
positions in Germany's gas distribution sector and our position
as a key player on the global gas market," he added.
Gazprom plans to extract 15 bcm from the field next year.
Gazprom and E.ON have been discussing for several years a
deal under which Gazprom would sell a 25 percent minus one share
in the Yuzhno Russkoye field to the German firm in return for
some of its assets in Europe.
The companies said on Monday they have made significant
progress in the talks and drew up a list of E.ON's power assets
across Europe for the swap. Results are expected soon.
E.ON holds around 6.4 percent of Gazprom's stock, and has
agreed to pay the gas firm 1.2 billion euros for the Yuzhno
Russkoye stake and to give it just under 50 percent of its
Hungarian gas trading and storage units.
But Gazprom has said it was not entirely happy with
developments in Hungary's energy sector and was looking for
other solutions in the talks with E.ON, which will take place
over the coming days.
In August E.ON said it was considering giving Gazprom stakes
in gas-to-power plants in Britain as part of swaps under
Gazprom and BASF completed a deal that gave BASF unit
Wintershall 25 percent minus one share in Yuzhno Russkoye and
increased Gazprom's share in a joint German gas trading firm,
Wingas, to 50 percent minus one share from 35 percent.
The Nord Stream pipeline, which will take Russian gas under
the Baltic Sea, is due to begin pumping 27.5 billion cubic
metres of gas a year to Europe in 2010, with a second pipeline
later doubling capacity to 55 bcm.
It is majority owned by Gazprom, while BASF and E.ON have
(Writing by Amie Ferris-Rotman)