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Lack Of Alternatives Sees EU Sign New Russian Gas Deals

Lack Of Alternatives Sees EU Sign New Russian Gas Deals

Several recent gas deals will tie Russia and Germany closer together.

Russia’s Gazprom announced an agreement on asset swaps with European partners including OMV, BASF, E.ON, and Royal Dutch Shell. The deals will kick start the Nord Stream gas pipeline expansion and also give Gazprom a greater presence in Europe, while giving several European companies assets inside Russia.

For example, Austrian-based OMV will receive a 24.98 percent in two fields in Russia in exchange for the “participating interest in OMV.”

“This Agreement is another step closer to the cooperation with Gazprom along the entire value chain. We purchase Russian gas for our European customers. Together we contribute to the security of supply by implementing the Nord Stream II project. In addition, right now we are broadening our trust-based partnership for producing natural gas in Siberia,” said Rainer Seele, the Chairman of the OMV Executive Board.

Related: The Mirage Of An Iranian Oil Bonanza

Gazprom also announced asset swaps with BASF, a deal that had first been announced in 2013 but was put on ice after the deterioration in relations following the crisis in Ukraine. But the two sides now plan on completing the swap. Gazprom will gain control of Wingas GmbH, a gas storage and trading entity based in Germany. Wingas services the Czech Republic, Austria, and Germany, supplying wholesale and retail natural gas.

In exchange for Gazprom getting a stronger foothold in Europe, Wintershall, a subsidiary of BASF, will take a position in natural gas fields in Siberia. Gazprom will also take a 50 percent stake in a North Sea oil and gas project owned by Wintershall.

The most newsworthy item was the announcement of the Nord Stream pipeline expansion. The Nord Stream Pipeline allows for Russian natural gas to reach Western Europe, bypassing Ukraine. A third and fourth line of the pipeline system will be added by 2019, doubling Nord Stream’s capacity to 110 billion cubic meters per year (bcm/y).

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