RusEnergy

14.09.2006 The International Herald Tribune - Jurgen Hambrecht, head of the huge German BASF chemical manufacturing complex, that receives most of its massive gas supplies from Russia's natural gas monopoly Gazprom, gave an interview to the International Herald Tribune and urged Europe to thank Russia for the steady supply of the blue fuel. Hambrecht, who has run the German chemical giant since 2003, hopes he has answered the question of how to keep energy-intensive BASF running by developing an ever-closer partnership with Gazprom. Last year, BASF became part of a consortium, led by Gazprom, to build a gas pipeline under the Baltic Sea. It is now embarking on a venture with Gazprom to market and distribute Russian natural gas throughout Europe. The alliance puts Hambrecht in the position of defending a monopoly gas exporter that has raised hackles in Europe with its muscle-flexing and expansion plans. But for Hambrecht, this is a reality Europe must accept as it debates how to secure its long-term energy needs. "There are some objections that Gazprom is a sort of monopoly," Hambrecht said in an interview. "But Gazprom has delivered over many decades the energy we need in Europe reliably and at highly competitive prices." Though BASF was praised in financial markets for securing its energy needs, the company has contributed to setting an energy policy for Germany and the rest of the Continent, the wisdom of which is being debated. Gazprom began the year by briefly cutting off the flow of gas to Ukraine in a pricing dispute, a move that may have made commercial sense, but which Hambrecht conceded was a public relations disaster across Europe. But he argued that, to the extent that Gazprom reaps more rewards from energy distribution in Europe, the relationship will evolve into one of mutual interdependence, making such disruptions less likely. For now, though, Europeans need to accept that Russia has what it needs. "It a good thing to recognize this, and it is coming at the right time," he said. Hambrecht gave a full-throated endorsement of Gazprom as an energy partner. BASF's relationship with Gazprom really got started in 1993 with the creation of Wingas, a joint venture with Gazprom, through Wintershall, the energy division of BASF. The two companies built a gas pipeline from the German border to BASF's Ludwigshafen plant, and began selling gas to corporate customers as a way to make the conduit profitable. That put Gazprom in the lucrative business of distributing gas — rather than simply pulling it out of the ground — and secured BASF's energy needs. Wintershall last year provided BASF with 18 percent of its revenues — which rose nearly 50 percent from 2004 to 2005 — suggesting the bet has paid off as gas prices rose. BASF also enjoyed a secure supply of energy at good prices. "Sure, you can say this is on the fringes of our core competences the chemical industry," Hambrecht said. "But if you want to have reasonably priced gas here then you need certain economies of scale and infrastructure." In April, with the Baltic pipeline project under way, BASF took its partnership with Gazprom one step farther. In exchange for a nearly 35 percent interest in a bountiful Western Siberia gas field, BASF is now setting up Wingas Europe, a 50-50 joint venture that will market gas throughout Europe, furthering the Russian company's goal of embedding itself in Western Europe's energy infrastructure. Claudia Kemfert, an energy analyst with the German Institute for Economic Research in Berlin, pointed out that BASF's projects amounted to a strategic decision in favor of a single supplier — Russia — rather than diversifying to Norway and Qatar, for example, or developing alternatives to fossil fuels. "You always have to see energy in a broader context," Kemfert said. "These companies are helping feed demand for energy, and deepening our dependence on Russian sources."