BASF, Gazprom cancel asset swap deal over ‘political environment’

Jonathan Lopez

19-Dec-2014

GazpromLONDON (ICIS)–The current “difficult political environment” was the reason behind BASF and Russian energy major Gazprom cancelling their planned asset swap, a spokesperson for the German chemical major said on Friday.

The German company said both firms will continue their joint ventures in Europe and Russia.

Under the swap, which was initially agreed in 2012 and was due for completion by the end of 2014, BASF’s oil and gas subsidiary Wintershall would have transferred its stake in a jointly-operated natural gas trading and storage business to Gazprom.

Gazprom would have also received a 50% share in the activities of Wintershall Noordzee, which is active in the exploration and production of oil and gas in the southern North Sea.

In return, two additional blocks of the Achimov formation of the Urengoi natural gas and condensate field in western Siberia would have been jointly developed by Gazprom and Wintershall.

Both companies announced late on 18 December they were cancelling a planned asset swap but did not disclose the reason why.

“Due to the currently difficult political environment, BASF and Gazprom have decided not to complete the asset swap planned for the end of the year,” said BASF’s spokesperson.

“Together, both companies will continue to make a significant contribution to secure Europe’s energy supply. The facts clearly show: Europe and Russia need each other also in the future,” it added.

Moreover, BASF said Europe will continue to be the largest and “most important” market for Russian natural gas exports in the future.

BASF also said as a result of the cancellation it would record additional expenses for 2014 and would need to restate 2013 results, as the company could no longer classify the assets and liabilities of the natural gas trading business as a disposal group, leading to expenses of €113m in 2013 and €211m in 2014.

The Russian economy has increasingly been the target of western sanctions after the country decided to annex the Ukrainian peninsula of Crimea in March this year.

Moreover, the country’s economy is suffering from lower crude prices, with much of the state’s income depending on exports of oil and natural gas to the rest of the world.

Economic headwinds have taken the Russian rouble to historical low levels against major world currencies.

Russia’s president, Vladimir Putin, during his year-end speech on 18 December, said the economic crisis could last two years in the worst case scenario, but assured the country has enough tools to fight against the crisis.

Putin did not accept, however, any responsibility for the current crisis, blaming external factors, mostly the oil price and the western sanctions imposed.

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