Gazprom Signs Deals With E.ON, OMV, Shell For New Pipeline to Germany
During the first day of the St. Petersburg International Economic Forum, some deals indicated that Russian gas strategy might rely on Germany and the Balkans. Considering that the European Union is reportedly closer to extending economic sanctions by six months against Russia, this piece of evidence might appear quite counterintuitive.
The most likely, though not mutually exclusive, explanations might be (i) an inability of the Chancellor Angela Merkel to impose her political will on German companies, and (ii) some form of bluff on the German side, where political declarations for the European public are going in the opposite direction of national intentions.
SHELL, E.ON, AND OMV SIGN MEMORANDA WITH GAZPROM
According to a note released by Wintershall on Thursday, the majority of Germans would like to continue mutually beneficial ties with Moscow, dropping economic sanctions that are considered to be unlikely to contribute to solving the political crisis. Along with Germany's E.ON, Dutch Gasunie, and France’s ENGIE, Wintershall is Gazprom’s partner in the Nord Stream project.
Also on Thursday, Gazprom has agreed to build a new pipeline to Germany under the Baltic Sea with Shell, E.ON, and Austria’s OMV.
“Since the commissioning of Nord Stream pipeline, Gazprom has been investigating potential extension of this export route. Now we are going to proceed with the implementation of this project together with our partners," Gazprom CEO Alexei Miller commented in a statement.
Gazprom said that it signed a Memorandum of Intent with E.ON and OMV for a 55 bcm gas pipeline (which is only slightly lower than the 65 bcm Turkish Stream). OMV confirmed the deal in a note, adding that the project could comprise two lines in addition to the existing Nord Stream pipeline. The Austrian company and Gazprom also signed other forms of cooperation.
‘The parties agreed in the Memorandum to evaluate a possible participation of OMV in the project of development of Areas IV and V of the Achimov formation of the Urengoy oil, gas and condensate field in Russia based on a possible exchange of assets’ OMV wrote on its website in the afternoon.
Gazprom is also holding negotiations with Greece and Serbia. The Wall Street Journal reported that Athens expects to sign a preliminary deal for its participation in Russia-led project to ship gas through Turkey to European markets in the coming days. Greek Prime Minister Alexis Tsipras should speak with Russian President Vladimir Putin on Friday.
Meanwhile, Gazprom’s Alexey Miller did not waste time. On Thursday, apart from the anticipated deals, he met with Dusan Bajatovic, Director General of state-owned Srbijagas.
‘The parties addressed the current issues and the prospects for bilateral cooperation in the energy sector. The meeting looked at mid- and long-term gas supplies from Russia to Serbia and other European countries as well as at joint UGS projects in the Republic’ the Russian giant wrote on Thursday.
ROSNEFT IS THE OTHER PROTAGONIST OF THE FIRST DAY OF THE ST. PETERSBURG INTERNATIONAL ECONOMIC FORUM
Gazprom isn’t the only company that made the headlines during the St. Petersburg International Economic Forum (18-20 June). Rosneft reported a flurry of deals too.
Among others, it signed updated commercial parameters with Alltech Group for cooperation on the project of the gas fields’ development in the Nenets Autonomous District, a MoU with Russian Machines for joint CNG projects, a cooperation agreement with tubular structures producer TMK for joint research activities, a partnership agreement with Sinara Group for oil product supply, and a contract for gas supply with E.ON Russia.
‘The contract signed with E.ON Russia provides for supply of 4.4 bсm of gas within 5 years. This resource will be directed to Surgutskaya GRES-2. The contract was signed in pursuance of an earlier contract for gas supply valid from 2013 to 2015. The achieved agreements demonstrate the quality level of partnership and long-term cooperation between Rosneft and E.ON Russia, the two leaders of the Russian energy sector’ Rosneft said.
As reported by Rosneft, E.ON Russia Holding GmbH. – a 100% subsidiary of E.ON SE International Energy - holds 83.7% of E.ON Russia shares.
This last deal indicates how German companies are likely to benefit from the situation. In this sense, the German gains could further augment.
BASF’S WINTERSHALL SENDS A RESOUNDING MESSSAGE: STOP SANCTIONS
Coherently, Wintershall made it clear: the German industry wants stronger ties with Russia.
“While most Germans are sceptical about the effectiveness of the current economic sanctions against Russia, they firmly believe that close economic cooperation with Russia can have a positive effect on the political situation, and should be intensified,” Professor Manfred Güllner, founder and Managing Director of the Forsa institute, said in a survey commissioned by Wintershall.
A majority (52%) of the 1,000 people interviewed said that Germans consider Russia to be a reliable economic partner.
‘Specifically pertaining to natural gas and other energy supplies, Russia’s reputation is even more positive: for 56 percent of the German population see Russia as a reliable energy supplier. Only 40 percent do not see Russia as a reliable energy supplier’ Wintershall reported.
The message arrives a few hours after European ambassadors agreed on Wednesday to extend by six months the sanctions that should expire at the end of July. According to The New York Times, the decision should be ratified by EU Foreign Ministers next week.
It is too early to understand whether the messages delivered by German companies are grounded in reality or not. It is time, though, to underline a clear mismatch between Merkel's positions and national energy companies' statements.
Sergio Matalucci is an Associate Partner at Natural Gas Europe. He holds a BSc and MSc in Economics and Econometrics from Bocconi University, and a MA in Journalism from Aarhus University and City University London. He worked as a journalist in Italy, Denmark, the United Kingdom, and Belgium. Follow him on Twitter: @SergioMatalucci