Gazprom sells natural gas to E.ON through 2036

Energy Trade

OAO Gazprom, the world's largest producer of natural gas, agreed to sell 400 billion cubic meters of the fuel to Germany's E.ON AG through 2036, helping the Russian company fill a new pipeline under the Baltic Sea. The deal extends some current contracts, which would expire in 2020, for 15 years and establishes new contracts beginning as early as 2010 for additional capacity, Dusseldorf-based E.ON said in an e-mail. The amount represents a third of E.ON's current annual gas supply, the company said. Gazprom and E.ON, together with BASF AG, are building a natural-gas pipeline from St. Petersburg to Greifswald, increasing the amount of the fuel available in Germany, Europe's second-largest gas market. Russia supplied about 35% of the fuel consumed in Germany in 2005, where gas is increasingly used to heat flats and generate power. „These contracts strengthen our partnership with the world's largest producer of gas,” Burckhard Bergman, the CEO of E.ON Ruhrgas, said in the statement. „We're preparing to replace declining deliveries from western European sources and securing additional supplies for the growing European market.” E.ON shares fell 36 cents, or 0.4%, to € 99.60. Gazprom shares closed unchanged at $11.60.

The contract is bigger than the first contract for natural-gas deliveries through the pipeline signed by BASF and Gazprom. Wingas, a joint venture of the two companies, will from 2010 receive 9 billion cubic meters of natural gas for 25 years, the companies said in Oct. last year. Gazprom said one element of the deal secures E.ON deliveries of up to 300 billion cubic meters of gas from 2020 to 2035. Another part secures 100 billion cubic meters from 2010 to 2036. E.ON, whose Ruhrgas unit is Germany's largest gas supplier, aims to produce as much as 20% of its own gas needs to gain greater control of procurement costs and avoid competing for supplies. The $10.5 billion Baltic pipeline will increase available supplies to Germany by 28% from 2010. Natural gas is increasingly being used to heat flats and to generate power. Almost half of all flats in 2005 were heated with the fuel, up from about a fourth 15 years ago, according to figures from Ruhrgas. (Bloomberg)

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