Eon struggles to finalise asset swap deal with Gazprom
Eon’s negotiations with Gazprom to acquire a stake in the giant Russian field Yuzhno Russkoye have failed to produce any results, contrasting markedly with the fortunes of Wintersall which managed to conclude a similar deal back in December (see EGM 14.12.1). Talks were difficult, Eon c.e.o. Wulf Bernotat said at the utility’s AGM in Essen this month.
The main reasons for the fruitless negotiations were the recent rise in gas prices and the change at the top of the Russian state, Bernotat explained, with Gazprom deputy c.e.o. Alexander Medvedev taking over as president from Vladimir Putin. Eon is trying to get a 25% stake (minus one share) in the Yuzhno Russkoye field in western Siberia which has proven reserves of over 700 billion cubic metres (Gm3). In return, the German company has offered to give Gazprom shareholdings in some of its assets in western and central Europe, including power plants and underground storage facilities. A major sticking point is the value of these assets, which still needs to be determined. Unconfirmed reasons behind the delay include Gazprom’s widely-rumoured request to Eon to be cut in on some of the German major’s UK power generation portfolio. Eon UK owns and operates five gas-fired power stations with more planned. Also, the final arrangements with Eon are rumoured to depend in part on establishing more regulatory certainty over the Nord Stream pipeline.
The Nord Stream partnership closely parallels Yuzhno Russkoye’s, with Eon and BASF each having 24.5% of the company. Gas from both Yuzhno Russkoye and Shtokman is slated for transport to Germany through Nord stream. Yuzhno Russkoye is owned by Gazprom and German Wintershall, the BASF subsidiary. Wintershall has 25% minus one share of the company Severneftegazprom SNGP, which holds the licence for the field. BASF also holds a 35% stake in the economic rewards of SNGP. Production at Yuzhno Russkoye started in December 2007 and is expected to plateau at 25 Gm3 in 2009.
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