BASF, Gazprom Renew Abandoned Asset-Swap Plan -- 2nd Update
04 September 2015 - 2:08PM
Dow Jones News
By Neetha Mahadevan
FRANKFURT--An energy-industry asset swap between German
conglomerate BASF SE and Russian energy giant OAO Gazprom that
appeared dead last year due to strained relations between Europe
and Russia is back on, the companies said Friday.
The surprise U-turn underscores the challenge multinationals
face navigating the standoff between Russia and the West over
separatist violence in Ukraine.
The U.S. and Europe Union have imposed sanctions on conducting
business with allies of Russian President Vladimir Putin and
Russian state-backed companies. But the German-Russian deal's
resurrection suggests that Russia may still yield fertile ground
for Western multinationals that are able to maneuver around
sanctions and balance political considerations against business
interests.
Neither company said what prompted the reversal now.
They first announced the asset swap in December 2013 and it was
approved by the European Commission, the EU's executive arm. But
they shelved it last year amid rising political tension.
"Due to the difficult political environment, BASF and Gazprom
had decided not to complete the asset swap planned for the end of
the 2014," BASF said. "We did not exclude completing the asset swap
at a later date and came to the joint decision to now complete the
transaction," it said.
A Gazprom spokesperson wasn't immediately available to
comment.
The deal will bolster Gazprom's business in Europe, where it has
faced increasing competition and regulatory pressure while giving
Wintershall AG, wholly owned by BASF, a chance to expand its
natural gas production through access to gas fields in Siberia.
As previously planned, the deal will see oil and gas firm
Wintershall hand over to Gazprom a jointly run gas storage and
trading business, Wingas GmbH, which generated more than $12
billion in revenue last year.
The swap also gives Gazprom a 50% share in Wintershall's Nordzee
B.V. business which produces oil and gas in the southern stretches
of the North Sea.
In return, Wintershall will receive a 25.01% share in the
development of Urengoy gas fields in western Siberia, which contain
around 274 billion cubic meters of gas, Interfax reported.
"We look forward to further expanding the joint production of
natural gas and condensate with our partner Gazprom in western
Siberia," BASF Chief Executive Kurt Bock said.
Germany's lobbying group for business with Eastern Europe touted
the deal's prospect for bridging differences with Russia.
"We hope that the joint economic projects convey a political
rapprochement and raise hopes of creating improved framework for
cooperation," said Eckhard Cordes, who heads the group,
Ostauschuss.
A spokesman for German Foreign Minister Frank-Walter Steinmeier
was cooler, saying the deal could signal a thaw "but it is more
appropriate to take a skeptical approach on the matter."
Shortly after the asset swap fell apart last year, Wintershall
sold Gazprom its 15% share in Gazprom's South Stream pipeline
project for an undisclosed sum. The project was to be used to
supply natural gas from Russia to Europe through Bulgaria. Mr.
Putin scrapped the project because of growing opposition from
European leaders. BASF continued other joint ventures in Europe and
Russia.
The renewed deal is expected to be concluded by the end of the
year.
Heide Oberhauser-Aslan
in Frankfurt,
Thomas Grove
in Moscow and
Christian Grimm
in Berlin contributed to this article.
Write to Neetha Mahadevan at neetha.mahadevan@wsj.com
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(END) Dow Jones Newswires
September 04, 2015 08:53 ET (12:53 GMT)
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