February 15, 2011
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№ 2 (February 2008)

European Gas Deregulation Suits Gazprom Well

Rules governing the deregulation of the European gas market required European energy companies to transfer some of their existing contracts for gas distribution to other companies.

By Elena Zhuk

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And as Gazprom’s Alexander Medvedev puts it, “Gazprom did not miss its chance when contracts were resigned and prolonged.” In 2006, Gas de France booked 1.5 bcm of its pipeline capacity with Gazprom. As of October of 2007, Gazprom has been supplying directly to customers of Gas de France, which holds the leading position among European gas distributors and caters to more than 11,000 French consumers.

In accordance with agreements signed in 2006–2007, Gazprom’s subsidiaries will start direct supplies to Austria, Czech Republic and Bulgaria.
An agreement signed with the Italian Eni will allow increasing direct gas sales volume to 3 million cu. m by 2010. Also, Enel S.p.A. is ready to sell 200 million euros of assets to Gazprom, plus minority stakes in an Italian electric power station.

Commenting on the deal, Konstantin Reily, an analyst with Finam Investment Holding, published the following on Finam’s website: “In Europe, Italy was second to Germany in the amount of joint projects with Gazprom, and the final section of the proposed Southern Stream pipeline will be laid in the southern part of Italy. Having acquired power facilities in this country, Gazprom will benefit further by participating in the creation of value.”

Founded in 2005 in the U.K., Gazprom Marketing and Trading Ltd., a subsidiary of Gazprom, strengthened its position in the European fuel-and-energy market by acquiring an active retail business. In an ongoing effort to get closer to the end user, this Gazprom “daughter” bought a British company, Pennine Natural Gas Ltd., thus expanding its client base and increasing its sales outlets from the respective 600 and 900 in 2006 to 2,600 and 6,800 respectively in 2007. At the end of 2007, Gazprom’s U.K. subsidiary was licensed to operate in Ireland. Within the first five years of its operation, the company is planning to take 10 to 15 percent of the local market.

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