E.ON secures stake in Yuzhno Russkoye gas project

Russia's state-owned OAO Gazprom has signed an asset swap agreement granting German utility E.ON AG a stake in the Yuzhno-Russkoye natural gas project.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Oct. 2 -- Russia's state-owned OAO Gazprom has signed an asset swap agreement granting German utility E.ON AG a stake in the Yuzhno-Russkoye natural gas project.

Under the agreement, E.ON will receive 25% minus one ordinary registered share in the charter capital of OAO Severneftegazprom (SNGP), owner and operator of the Yuzhno- Russkoye project in southern Russia and will participate in the development of the field.

In return, Gazprom will receive 2.93% of its own shares, which were held by E.On subsidiary E.ON Ruhrgas through the company ZAO Gerosgaz. E.ON Ruhrgas will retain a 3.5% stake in Gazprom.

As a result of the agreement, Gazprom will hold a stake of just over 50% in SNGP, while E.ON Ruhrgas and BASF SE's subsidiary Wintershall will each have a stake of 25% minus one share.

With this agreement, E.ON aims to obtain about 6 billion cu m/year from the Russian field or some 60% of its gas-production target of 10 billion cu m/year. Yuzhno Russkoye field is considered one of the world's largest and has gas reserves of more than 600 billion cu m, according to E.ON.

In September, Rainer Steele, a member of the Wintershall board of directors, said gas production from Yuzhno-Russkoye field is expected to reach 25 billion cu m next year, 2 years ahead of schedule.

Rainer Steele said production at the field is being expanded "more quickly than initially planned" and that output from the field will reach the maximum 25 billion cu m/year in 2009, 2 years ahead of the targeted 2011 timetable originally planned.

In June, Gazprom CEO Alexei Miller said the firm increased its natural gas production forecast for 2008 by 2 billion cu m of natural gas to 563 billion cu m, or 2.6% more than last year.

"In 2007, Gazprom commissioned several large fields, which allows us to secure the necessary level of production a decade ahead," said Miller, referring to development of large new deposits at Kharvutinskoye and Yuzhno-Russkoye fields.

Contact Eric Watkins at hippalus@yahoo.com.

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