E.ON, Engie, GS, Novatek among bidders in first Gazprom gas tender

BASF is reviving the planned asset swap with Gazprom after it was called off last December.

Pressed on what had changed since, BASF declined to respond directly.

Since then, however, Europe has been diversifying its energy supplies, spurred by the 2009 Ukraine gas crisis, which disrupted supplies to Europe because of a dispute between Russian Federation and Ukraine over energy prices.

The second deal would double the capacity of the Nord Stream pipeline to deliver gas to Europe through the Baltic Sea, bypassing Ukraine.

In June, Gazprom announced plans to build two additional branches of the Nord Stream gas pipeline, running from Russian Federation to Germany, in a joint project with E.ON, Shell and OMV, with an estimated cost of 9.9 billion euro (over $11 billion).

There have been several alternative sources of supply that European policymakers have been considering.

Alexander Medvedev, deputy CEO of Gazprom, said the price of gas in the tender would be higher than the level set in the company’s long-term contracts.

Russia’s Gazprom began to test a new way of selling gas on Monday, giving customers a chance to buy at tender in addition to taking out long-term contracts.

Gazprom and its Turkish partners have decided to focus on the first phase of the project for now and to discuss the next steps later on, a Gazprom official said.

OMV Chief Executive Rainer Seele, a German who recently joined the Austrian firm after many years at BASF, spoke of extending a “trustful partnership”. “New projects like Nord Stream II are needed to ensure that Europe’s demand for energy is met, especially as gas production in Europe itself is falling”, said Ben van Beurden. “Another sale of 3 bcm for summer 16 would show that Gazprom is responding to the pressures detailed above and will, at least at the margins, compete for market share”.

Extra gas from Gazprom, which already supplies around a third of Europe’s needs, comes as markets are facing tough supplies this winter because of the Dutch government’s decision to cap production at Groningen, Europe’s biggest gas field. Subject to the swap deal, OMV will acquire a 24.98 per cent stake in the project for developing Blocks 4A and 5A of the Achimov deposits at the Urengoy oil, gas and condensate field in exchange for the participating interest in OMV.

Britain’s energy ministry said it would examine the deal as closely as “any deal involving assets within British waters”. BASF had abandoned that swap arrangement in December 2014 because of the geopolitical consequences of Russia’s invasion of eastern Ukraine and its annexation of Crimea.