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THE TIMES: Russians increase pressure on gas industry: “GAZPROM, the Russian gas giant, has stepped up the pressure on UK producers after agreeing to buy the country’s biggest onshore gas field.” ( 22 Dec 04


By Peter Klinger

December 22, 2004


GAZPROM, the Russian gas giant, has stepped up the pressure on UK producers after agreeing to buy the country’s biggest onshore gas field.


Only a month after declaring its intention to snatch 10 per cent of Britain’s gas market, Gazprom said that it had joined Wintershall, the German gas company, to buy the Saltfleetby gas field from Australia’s Roc Oil for Ł44 million.


The Saltfleetby field is in the South Humber basin in Lincolnshire and has produced 54 billion cubic feet (bcf) of gas since it was brought into production in 1999.


The acquisition will give Wingas, the Gazprom Wintershall venture, an estimated 36 bcf of recoverable gas reserves. The maturing field will also give the venture partners valuable gas storage space.


Gazprom owns 35 per cent of Wingas while Wintershall, a wholly owned subsidiary of the German industrial giant BASF, holds the other 65 per cent.


Gas storage is seen as an increasingly important component of the UK gas industry’s long-term strategy. Dwindling North Sea production has prompted operators to focus on pipelines to continental Europe or storage facilities in Britain to meet future gas demands. Gazprom already has a 10 per cent stake in a pipe linking Britain and Belgium.


John Doran, Roc’s chief executive, said the Saltfleetby deal would allow his company to book a Ł28.5 million exceptional profit to invest in exploration in Australia and Mauritania.


He said: “As the Saltfleetby field moved into the mature phase of its productive life, Roc has focused increasingly on how best to maximise the value of the field.


“It became increasingly clear that any value maximisation exercise would be enhanced if it contained an element of gas storage. However, after reviewing gas storage in a UK context, Roc decided that it did not want to become a gas storage company because its upstream skill set and corporate strategy were inappropriate for life as an owner and operator of a gas storage facility.”


Roc’s shares rose almost 10 per cent to 75˝p.


Vitaly Vasili, Gazprom’s UK marketing chief executive, said last month that it would increase its UK gas sales by 40 per cent a year. Gazprom has about 3 per cent share of the UK’s annual 100 bcf market, but hopes to sell 13 bcf by 2010 using “competitive pricing” strategies. It plans to target industrial users, putting it on a collision course with giants such as BP, Shell and Total.

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