Baltic Rim gas, retail businesses overhauled

Finnish petroleum and energy company Fortum Oy has sold 50% of the shares of Gasum Oy, its 75-25 gas supply joint venture with Russia's Gaz- prom.

The sale was a condition for approval by the European Commission of Finland's plans to merge state petroleum and electric power firms Neste Oy and Imatran Voima Oy, respectively, to create Fortum (OGJ, Dec. 29, 1997, p. 23).

Meanwhile, Fortum and Norway's state oil company Statoil have signed a memorandum of understanding (MOU) to set up a joint venture that would combine all Neste and Statoil retail and wholesale marketing operations and oil terminals in Estonia, Latvia, Lithuania, Poland, and Russia. It is to take effect Jan. 1, 2000.

This would establish the JV as the greater Baltic Rim region's market leader and lead to cost-cutting and improved profits, Fortum said.

Gasum sale

The Fortum shares in Gasum were sold for a total of 1.7 billion markka ($300 million) to German gas distributor Ruhrgas AG, a consortium of Finnish industrial conglomerates, and the Finnish state.

Interest holders in Gasum are now: Fortum and Gazprom 25% each; Finnish state 24%; Ruhrgas 20%; and Mets?-Serla Corp., Stora Enso Oyj, and UPM-Kymmene Corp. 2% each.

Gasum imported 3.9 billion cu m of gas from Russia in 1998, for sale in Finland.

The company has plans to expand its pipeline grid to sell gas in the Baltic states and Scandinavia.

Ruhrgas said Gasum's grid currently comprises 900 km of high-pressure pipelines serving customers-in particular operators of combined heat and power stations-in southern Finland.

The German firm sees high growth potential for gas in the Baltic region, where gas provides only 9% of the primary energy market compared with 21% for Western Europe as a whole.

At the same time, Ruhrgas acquired a further 1.5% of the shares of Gaz- prom, for an undisclosed sum, bringing its total interest in the Russian gas giant to 4%. Gazprom has agreed to meet up to one third of Ruhrgas's gas requirements to 2030.

Baltic Rim JV

Fortum projected the JV's net sales, based on the two firms' 1998 performance, at about 3.65 billion markka/ year.Combined retail outlets in the five countries total 285, along with 4 oil terminals; current retail marketing employment there comprises 2,100 for Statoil and 800 for Fortum (Neste Marketing).

The JV would continue to develop manned and self-serve retail outlet networks in the Baltic Rim. The self-serve outlets in Estonia, Latvia, Lithuania, and Poland will retain the Neste logo, while the manned outlets in those countries will carry the Statoil logo.

The Neste manned outlets in St. Petersburg will remain under their current logo; Statoil's only manned outlets in Russia are two in Murmansk.

The JV MOU does not include the Neste retail network in Finland nor Statoil's retail networks in Scandinavia and Ireland.

In Finland, Fortum operates 1,043 Neste service stations, self-serve retail outlets, diesel fuel outlets, and sales points.

Statoil's retail networks in Norway, Sweden, and Denmark are owned 50-50 by Statoil and Swedish retailer ICA, an arrangement covered by an agreement the two firms signed in mid-May. Overall, Statoil owns about 2,000 retail outlets in nine countries.

The pact not only would consolidate the two firms marketing positions in the Baltic Rim, it also would be used to leverage faster market growth for both than would happen for each alone, Fortum said.