Gave Europe for the USA

Gazprom agreed with Shell on gas supplies to California

Gazprom will be able to independently sell annually about 1 million tons of liquefied natural gas from the Sakhalin-2 project, control over which it received after the entire volume of fuel was contracted on a long-term basis. Yesterday, following negotiations between the chairman of the board of the Russian concern, Alexey Miller, and the executive director of Royal Dutch Shell, Jeroen van der Veer, several contracts were signed that will allow Gazprom to enter the market of the southwest coast of the United States with its LNG, and the Anglo-Dutch corporation to increase its presence in continental Europe.

The operator of the Sakhalin-2 project, Sakhalin Energy, and Shell Eastern Trading Ltd canceled a 2004 contract for the supply of 37 million tons over 20 years, after which two new contracts were issued. One half of this volume was again contracted by the American subsidiary of Shell, and the second by Gazprom Global LNG Ltd. Approximately 1 million tons per year each from 2009 to 2028. In addition, the Anglo-Dutch company will cede to Gazprom's subsidiary the rights to regasify gas at the Energia Costa Azul LNG terminal in the Mexican state of Baja California, as well as gas transportation capacities that will allow gas to be delivered to the more promising American market.

In exchange for this, starting next year, Gazprom will begin supplying Royal Dutch Shell with an equivalent volume (about 1.2 billion cubic meters of gas per year) via pipeline to the European market. The gas will go through the Yamal-Europe pipeline to the Frankfurt-on-Oder delivery point on the Polish-German border. At the same time, it cannot be ruled out that after the launch of Nord Stream, companies may change the route of gas supplies.

Gazprom and Shell highly appreciate the signed documents and note that these contracts provide opportunities for the development of the companies’ activities. The Russian giant has long been striving to increase its weight in the field of LNG supplies, which opens up new sales markets for it and a path to the global gas trading system. The ability to independently market 1 million tons of liquefied gas is a new level for Gazprom, which until now has been forced to be content with the resale of several other people's cargoes throughout the year.

But until the Shtokman project starts operating (the official start date for LNG supplies is 2014), it is premature to talk about Gazprom’s full entry into the global arena. Mr. Miller and Van der Veer also spoke about the prospects for expanding cooperation, in particular about projects to increase the capacity of the Sakhalin-2 project, as well as the construction of an LNG plant in Yamal. But this is a matter of the very distant future.

Gazprom owns a controlling stake in Sakhalin Energy, Shell has 27.5% (minus one share), Japanese Mitsui has 12.5%, Mitsubishi has 10%. LNG deliveries are due to begin in April.

Alexey GRIVACHS