The Associated Press

December 1, 2006

Gazprom exec. slams EU energy plans

By Alex Nicholson

A senior official with Russia’s Gazprom gas monopoly said Friday that a pending European antitrust plan to split up energy conglomerates smacked of “communism.”

Alexander Medvedev, deputy management board chairman and head of the company’s export division, also compared the EU’s antitrust plan to “selling cars without wheels.”

The EU proposals, which are due to be unveiled Jan. 10, would not extend to Russia’s energy sector and could present potential acquisition targets for Gazprom if implemented.

But Medvedev suggested that by chipping away at energy conglomerates that control both production and infrastructure the EU could destabilize companies’ investment plans and in so doing undermine its energy security.

Brussels has long pushed Russia to ratify an energy pact that would give independent producers access to its export pipelines and oil and gas fields, thus reducing Gazprom’s ability to charge monopolist rents.

Russia has resisted, arguing that it would need to receive equivalent strategic assets in Europe in exchange for any deal.

“In Europe the ghost of communism is back with all the attempts to take ownership of infrastructure and divide it,” Medvedev told reporters in a conference call Friday. “I hope at least the US will not go this way.”

He added: “It’s like asking car producers to sell cars without wheels and engines … In my opinion people without access or ownership of infrastructure on a long-term basis should not be allowed to play a role in the market.”

Potentially more harmful, the EU proposals could target Russia’s long-term gas supply contracts with European companies, something Gazprom has argued would weaken its ability to invest in new projects.

Separately, Medvedev insisted that Gazprom was capable of meeting the growing appetites of Europe and Asia without detriment to either market.

“I can assure you that we have enough reserves to meet both local demand and export obligations, including potential sales in new markets: in China, Korea, and the U.S. and Canada for (liquefied natural gas) sales. This is fully supported by investment programs,” he said.

In particular, Medvedev said that the company planned to invest some $40 billion over 25 years to develop the Bovanenkovo field in the arctic Yamalo-Nenets region. Gazprom would start pumping at the field in 2011 with production due to hit a peak rate of 150 billion cubic meters per year in 2015-2016, he said.

“This is quite sufficient not only to compensate for the decline in our current fields (but) to meet growing demand in Russia and export markets,” said Medvedev, who met with officials on a trip to the U.S. this week to improve ties with Washington.