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Gazprom Seeks Gas Sales in Asia to Diversify From Europe

OAO Gazprom Chief Executive Officer Alexei Miller
OAO Gazprom Chief Executive Officer Alexei Miller pauses during the company's annual general meeting of shareholders in Moscow. Photographer: Alexander Zemlianichenko Jr /Bloomberg

OAO Gazprom, Russia’s natural-gas export monopoly, is seeking sales agreements with India, China and South Korea to diversify from the European export market and ensure stable cash flow.

“These are the countries where we are now holding intense negotiations about new long-term contracts,” Chief Executive Officer Alexei Miller said today at the gas producer’s annual meeting in Moscow. “It’s hard to overemphasize the significance of this work.”

Gazprom, the world’s biggest gas producer, signed preliminary agreements with three Indian companies for liquefied natural gas this month, while failing to reach an agreement on pipeline supplies with China National Petroleum Corp. before Chinese President Hu Jintao’s visit to Russia. The company, which has sent tankers of LNG to India, China and South Korea from its Sakhalin-2 project, aims to supply 14 percent of the global market for the liquid fuel by 2030.

Gazprom will hold its next round of negotiations with China about a supply contract next month, Miller said.

Disagreements on pricing remain, with Gazprom insisting on parity with Europe, Miller told reporters today in Moscow. Gazprom is ready to start building a gas pipeline through the Altai region to China once a contract is signed, he said.

The expansion will boost export volume by at least 50 percent, reducing Gazprom’s dependence on Europe, its biggest market by revenue, Miller said. The company plans to continue increasing exports to Europe, where it supplied 23 percent of demand at the end of last year, he said.

Shipments to Europe and Turkey may reach 155 billion to 158 billion cubic meters this year and export revenue will probably rise to a record, Miller said. Total exports reached $36.6 billion in the first five months of the year, indicating Gazprom may beat a 2008 record of $81.6 billion, Deputy CEO Alexander Medvedev said on June 20.

Export volume has risen 26 percent in the first half of the year, or by 26.6 billion cubic meters, Miller said.

Gazprom won’t make significant changes in its long-term gas supply contracts after holding talks with European consumers, Miller said.

“No radical changes in the contract system are expected or planned,” Miller said. The company will maintain so-called take-or-pay clauses and a link to oil and product prices in the agreements, he said.

Gazprom may reach pre-crisis gas production levels in 2012 rather than 2013, Miller said. He forecast that the company’s earnings before interest, tax, depreciation and amortization may reach $60 billion this year.

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