Gazprom does asset exchange with Wintershall

Gazprom has signed an asset swap agreement with shareholder of the German Wintershall, BASF concern. The Russian party will provide Wintershall with access to two blocks of Urengoy deposits in exchange for entering Wintershall extraction projects in the North Sea. Gazprom and Wintershall are already experienced in joint extraction in the North Sea as well as at Urengoy deposit, however these extraction volumes were insignificant in scale of Gazprom.

On Friday Gazprom reported, an asset swap agreement of cooperation with shareholder of German Wintershall, BASF concern was signed. Gazprom is going to obtain up to 50% in North Sea projects of Wintershall in exchange for 25% plus share in development of two blocks at Urengoy gas deposit (IV and V blocks of Achimovsky gas beds hard to access). Gazprom specified, Wintershall would be able to increase its share in these blocks to 50%. The Wintershall North Sea projects Gazprom is interested in remain unknown.

Wintershall specifies, the projects will most likely be either in Great Britain or Netherlands (totally, Wintershall develops more than 30 blocks of North Sea oil and gas deposits, mainly at German, British and Norwegian shelf). However, it was pointed out, that final list of assets hadn’t been approved and the agreement signed on Friday was not legally binding, though it stipulated a number of “commercial and financial as well as corporative management” issues. Now the parties are assessing their swapped assets and can say nothing before this process is completed.

The only thing specified by Wintershall is that the company expects to start extraction at two blocks of Achimovsky beds by 2015. The German party considers, this extraction volume will be comparable at least with the volume extracted with Gazprom in the framework of other project – development of Achimovsky block at IA Urengoy deposit. Gazprom and Wintershall have bben developing this block since 2008 (Achimgaz JV, about 8 billion cubic meters of gas per year).

The exact shareholding proportions of Gazprom and Wintershall in the exchanged assets is not specified. However, the parties had already said, this would have been a parity exchange and signed an asset swap memorandum in March. Now the point is in signing of an analogous document with Wintershall shareholder.

Denis Borisov from Nomos-bank reminded, Gazprom had decided to enter foreign extraction market a long ago. For example, Gazprom has already led joint extraction with Wintershall in the North Sea – Wintershall claimed, the development of Wingate deposit on the sea border of Great Britain and Netherlands would start in 2011. Gazprom is co-owner of this deposit (20% of shares via Gazprom Germania). However, Wintershall reported, only one well with gas yield equal 1.5 million cubic metres had been put into operation there, thus annual extraction didn’t exceed 1 billion cubic metres.

“It is not quite clear, why Gazprom is so eager to start foreign extraction. There are no gas problems in Russia”, Mr. Borisov says. Vitaly Kryukov from IFD Capital adds, asset swap with Wintershall is image-building as well as trial to obtain access to German shelf extraction technologies. Gazprom will rather use its North Sea experience in development of Shtockman and gas extraction at Achimovsky bed at Urengoy deposit is more profitable with help of a partner sharing the expenditures, Mr. Borisov considers. Average prime cost of Gazprom gas extraction makes up $20 per 1 thousand cubic metres and prime cost of gas extraction at Achimovsky bed can be 1.5-2 times higher. Despite the fact, that Gazprom and Wintershall own Achimgaz on parity, only German party has invested into its development (about €300 million) and Gazprom only compensates these expenditures due to proceeds from gas realization by the JV.

Source: http://www.kommersant.ru/doc/1807177
Translated by Alexandra Utyasheva

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