German company buys into Russian gas field

Oct 2, 2008, 17:07 GMT

Dusseldorf - E.ON, one of Germany's biggest energy companies, said Thursday it had bought one quarter of the one of the world's greatest natural gas fields, at Yuzhno Russkoye in Russia.

The deal, which follows years of tortuous negotiations, was signed with gas monopoly Gazprom at a meeting of Russian and German government leaders on Thursday in the Russian city of St Petersburg.

Another big German company, BASF, has already bought a quarter of the same field.

E.ON controls a large part of Germany's gas and electricity supplies.

Part of the reason Russia and Germany are building the Nord Stream pipeline under the Baltic Sea is to tap the Siberian gas field, which has reserves of over 600 billion cubic metres, to feed the energy to German factories and homes.

Other European nations have warned that Germany may end up being too dependent on Gazprom.

E.ON has tried harder than some of its German rivals to develop non-Russian gas sources.

Under the transaction, Gazprom was able to buy back some of its own shares and reduce E.ON's influence on Gazprom.

The owner of the production licence and operator of the field will be Russian OAO Severneftegazprom (SNGP), a statement by E.ON said.

Gazprom will hold just over half of SNGP.

E.ON's Ruhrgas unit and and BASF's Wintershall division will each hold a stake of 25 per cent minus one share.

Gas production at the site started last year and will reach around 25 billion cubic metres annually as early as next year, enough to supply a metropolis of approximately 10 million households.

Under a complex swap, Gazprom is to receive E.ON Ruhrgas's 49 per cent stake in the Russian company ZAO Gerosgaz, which holds just under 3 per cent of Gazprom shares.

After the transaction, E.ON Ruhrgas will still hold a 3.5-per-cent direct stake in Gazprom.