Novatek Said to Seek Approval to Send Gas to EU Via Gazprom

Updated on
  • Novatek seeks exports to Europe, using Gazprom as agent
  • Petition sent to President Vladimir Putin, Vedomosti reports

Novatek OJSC, Russia’s second-biggest natural gas producer, renewed attempts to get the right to export its gas to Europe, according to a government official. 

Novatek seeks to ship fuel to Europe, paying a commission to state-run gas export monopoly Gazprom PJSC, in a plan to compete with Norwegian gas in the region, the official said, asking not to be identified as the information isn’t public. No decision has been made, Kremlin spokesman Dmitry Peskov told reporters on a conference call. Novatek and Gazprom declined to comment.

The request was sent to President Vladimir Putin, Vedomosti reported earlier Wednesday. Novatek could boost the nation’s gas exports by 2.4 billion cubic meters (85 billion cubic feet) a year, or about 1.5 percent of Gazprom’s current supplies to the European Union, worth about 9.4 billion rubles ($127 million) in export duties for the budget, the newspaper said, citing a letter from Energy Minister Alexander Novak to Putin Feb. 18. 

In Europe, Russia is competing with Norway, which shipped record volumes of gas to the region last year, as well as with the fuel delivered by tanker from destinations such as Qatar. More LNG may come to Europe as Cheniere Energy Inc. started exports from the U.S. last month and Asia becomes a less attractive destination after prices and demand there fell.

German Supplies

Novatek proposed to let it export gas produced by a Russian joint venture with Gazprom’s oil arm Arktikgaz OJSC, the official said. The company has a contract to supply German utility EnBW Energie Baden-Wuerttemberg AG since 2012, sourcing fuel in Europe.

Novatek Gas & Power GmbH, the company’s trader, contracted 3.1 billion cubic meters of gas last year, with only 0.7 billion cubic meters of gas initially produced in Russia, Vedomosti reported. Novatek’s exports from Russia could compete with Norwegian fuel supplied to German gas trader Verbundnetz Gas AG, 74 percent of which EnBW agreed to acquire late last year, the paper said.

Novatek and other Russian gas producers, including state-run Rosneft OJSC, have challenged Gazprom’s decade-long monopoly on gas exports. They partially succeeded in 2013 when Putin allowed other companies to ship Russian liquefied natural gas abroad. The government is concerned ending the pipeline monopoly would cut prices amid competition between Russian suppliers and cut budget revenue from gas exports, which was about $10.3 billion last year.

Rosneft also seeks to gain access to European exports via Gazprom, spokesman Mikhail Leontyev said today.

Officials in Moscow are discussing options to meet the interests of Gazprom and its domestic rivals. They include obliging the monopoly to buy some fuel from other producers at a price close to the export alternative, at least for a planned link to China, the Energy Ministry said last year. The government will prepare proposals on the issue by May 15.