Billionaire Timchenko Says Novatek Pushing for Export Rights
Stock Chart for Gazprom OAO (GAZP)
OAO Novatek, Russia’s second-biggest natural-gas producer, is seeking permission to export the fuel and break into markets held by state-run monopoly OAO Gazprom.
“Novatek is actively working toward getting export rights for Russian gas,” billionaire shareholder and board member Gennady Timchenko said yesterday in an e-mail.
The company only sells gas in Russia because Gazprom, the world’s largest producer, holds exclusive rights to export the fuel under a 2006 law. Novatek, based in Tarko-Sale, Siberia, has more than doubled output in eight years and said in February that it’s seeking to triple its market value to $100 billion in the “near term.”
Russia’s government, which gave Gazprom the monopoly to prevent domestic competitors from undermining export prices, has no plans to end its exclusive rights, President Vladimir Putin said in October, when he was prime minister. Such a move may be possible in the future, Putin said.
“Gaining export access would all but certainly boost the market’s appetite for the stock itself,” said Ronald Smith, a senior oil and gas analyst at Citigroup Inc. “It is more likely a story for 2014 or, at the earliest, 2013.”
Novatek rose 2.8 percent to 330.63 rubles in Moscow today.
The government agreed on a plan to accelerate tax increases on gas extraction for so-called independent producers, which include Novatek and oil companies, bringing their levy near the level Gazprom will pay from mid-2015, Deputy Finance Minister Sergei Shatalov said May 2.
The Finance Ministry’s gas-tax proposals are not final and Novatek will “lobby strongly” in discussions that may go throughout this year, Chief Financial Officer Mark Gyetvay said on a conference call with investors today.
Novatek will push more aggressively for gas-export rights if the tax increases are implemented, Gyetvay said. The company aims to resolve the issue in 2013 and is exploring all “theoretical” options to export gas, he said.
“The pressure on the government will depend on the domestic market and how quickly internal gas prices increase,” Valery Nesterov, an analyst at Troika Dialog in Moscow, said by phone. The move could lower prices amid competition between exporters, meaning Gazprom and the state “are likely to assert maximum resistance,” he said.
Russia is gradually increasing regulated domestic prices to make sales at home as profitable as exports. Gazprom sells gas to Europe at under long-term contracts at rates tied to prices for crude and refined products, with a time lag of as long as nine months. High Brent prices pushed Gazprom’s prices for European customers up by 27 percent last year, ensuring record revenue of 4.64 trillion rubles ($153 billion) in 2011. Gazprom ships gas to European clients by pipelines under long-term contracts.
Novatek agreed in 2010 with Gazprom on exports of liquefied natural gas from its planned Yamal LNG project on a commission basis. Gazprom will act as Novatek’s agent, charging a fee for exporting the producer’s LNG.
The agency agreement may be one of the possible options to pursue export rights, Gyetvay said, when asked if Novatek will use that mechanism again.
Should the gas-tax proposals be put into effect, Novatek may revise its long-term strategy and increase its equity stake in LNG projects on the Yamal Peninsula, Gyetvay said. The company may “adjust” its stake in the Yamal LNG project, which it is developing with Total SA. (FP) Novatek also is planning joint projects with Gazprom to liquefy LNG in the resource-rich Arctic region.
Novatek would seek a balanced approach to supplying gas to Europe, “rather than cannibalizing Gazprom exports,” Gyetvay said. “Last thing you want to see is complete chaos in negotiating with various customers in western Europe.”
Timchenko and Novatek Chief Executive Officer Leonid Mikhelson are the gas producer’s major shareholders, while Total has a 15 percent stake. Timchenko is also co-founder of Gunvor Group, the energy trader that agreed in March to acquire Petroplus Holdings AG (PPHN)’s Antwerp refinery in Belgium. Gunvor completed the purchase this month.
Putin, who was honorary head of a judo club founded by Timchenko in St. Petersburg, has said he isn’t involved in the billionaire’s businesses.
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