TRUCE BETWEEN GERMAN GAS SUPPLIERS

The stormy politics of Germany's natural gas suppliers looks set to calm down for a while.

This follows the first long term agreement for imports of Russian gas into the former East Germany.

At the center of action once again is Wintershall AG, Essen. This BASF AG subsidiary stole a lead on larger rivals in securing gas production from Russia's future field developments (OGJ, Sept. 14, 1992, p. 29).

Now, Wintershall/Gazprom joint venture Wintershall Erdgas Handelhaus GmbH (WIEH), Berlin, has signed a 20 year contract with distribution company Verbundnetz Gas AG (VNG), Leipzig.

The deal will provide VNG 3.5 billion cu m/year of Russian gas from 1994 to 1999, rising to 7 billion cu m/year in 2000. WIEH already supplies Russian gas to VNG but only in annual contracts.

The complexity of the German gas scene means that Wintershall and arch rival Ruhrgas AG, Essen, benefit from the deal. This allows them to step back from open conflict, at least over VNG supplies.

BREATHING SPACE

Wintershall Chairman Gert Maichel said, "Ruhrgas is market leader in the former West Germany and was a monopolist before Wintershall came along. Ruhrgas has tried to keep us out of the market."

WIEH has agreements to import 13.5 billion cu m/year of Russian gas starting in 2000. The new deal enables it to meet half of VNG's projected demand while still leaving enough for direct sales through its Stegal and Midal pipelines (OGJ, Sept. 28, 1992, p. 36).

Wintershall had been concerned about security of Russian gas supplies, particularly because its attempts to secure a second source from Norway's gas producer? came to nothing. Maichel said a gas transit agreement signed in January by the Russian and Ukrainian governments overcame those worries.

"Firm agreement with VNG means no one can keep us out of the market any more," Maichel said. It also gives Wintershall time to look for North Sea gas field purchases and develop a discovery on Block A6 off Germany.

STEP FORWARD

Ruhrgas' view of the deal is colored by its 35% interest in VNG. Other VNG shareholders are the Shell/Esso combine's BEB Erdgas und Erdol GmbH 10%, Wintershall 15%, East German municipalities 15%, and Gazprom, Den norske stats oljeselskap AS, British Gas plc, Ste. Nationale Elf Aquitaine, and former East German producer Gommern 5% each.

"It was time we had a long term agreement for eastern Germany," said Wilfried Czernie, vice president of government, international and economic affairs at Ruhrgas.

Czernie said the deal is a good step forward, bringing calm to the gas market and reliability of supply to eastern Germany.

"'With this long term agreement," he said, "we have an end to our quarrels of the last 2 3 years. However, where there is gas to gas competition in the market, the rivalry. will go on."