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Gazprom to dominate EU spot contracts

Energy Trade

RosUkrEnergo and Gazprom Export are drafting a contract for Gazprom to sell 4 billion cu. meters of gas from the Ukraine-EU border to Europe in spot contracts, a Gazprom official reported Tuesday.

Gazprom, which owns 50% in the Switzerland-registered RosUkrEnergo, will thus do way with competition in the most profitable though risky contract. However, the Russian gas monopolist may soon come against competition on the EU market with Dmitry Firtash, who holds 45% in RosUkrEnergo and whose firms are eyeing Hungary's Főgáz. Gazprom Export is to strike a deal with RosUkrEnergo to buy gas from underground storages in Ukraine, Gazprom's Deputy CEO Alexander Medvedev said Tuesday. RosUkrEnergo said in interview with Kommersant that the parties were still in talks for the purchase.

A Kommersant source informed on the course of the talks said Gazprom was going to buy 4 billion cu. meters of RosUkrEnergo's gas stored in underground facilities in Ukraine. The price will be close to a market one, the source added. The deal is also lucrative for RosUkrEnergo as it bought the gas at between $95 and $160/1,000 cu. meters, which means it will reap at least $500.5 million on the deal if the gas is sold at $250. Industry experts predict that Gazprom's export contract prices will grow to $280/1,000 cu. meters before the end of the year, which will increase RosUkrEnergo's profit by one-third.

Striking the deal with Gazprom, RosUkrEnergo will lose a chance to work on spot contracts with the European Union, analysts say. However, interests of Gazprom and RosUkrEnergo may clash again quite soon. Budapest authorities are considering selling 50% in the Főgáz gas firm that Russian investors are already eyeing, according to the MTI news agency. A Kommersant source close to Group DF, owned by Dmitry Firtash, confirmed the company's interest to Főgáz. (kommersant.com)

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