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Tuesday, November 20, 2007

Russia will supply a third of European gas

11/15/2007 - MOSCOW -(RIA Novosti economic commentator Oleg Mityayev) - At the 20th World Energy Congress in Rome on November 11-15, Russian representatives confirmed that they have chosen Europe as a priority market of energy supplies for many years ahead. Gazprom, for instance, intends to increase its share in the European gas market from the current 26% to 33% by 2015. It seems that Russia is not particularly worried about the EU initiative to protect its domestic energy market, which was made public in October. Last month, the European Commission published a package of bills separating electricity transmission and distribution, and gas production and transportation. This may affect companies from the countries that supply energy resources to the European Union but are not part of it, such as the Russian gas monopoly Gazprom. The company is obviously interested in the purchase of electricity assets and gas infrastructure in Western Europe. Its deputy chairman Alexander Medvedev again voiced his discontent with the new EU legislation at the congress. Russian Energy and Industry Minister Viktor Khristenko was much more reserved at the forum. He observed that in changing the energy legislation the EU should understand that the consumers are only one link in the chain and it is important to consider the position of the suppliers as well. He added though that it would be inappropriate to speak about Russia's contradictions with the EU on the new legislative acts. "It is up to the EU to decide what laws to adopt," he said. Moreover, it is not yet clear what consequences these initiatives may have in the energy sphere if they are adopted. CEO of the German energy giant E.ON Dr. Wulf H. Bernotat said recently that Brussels' plans on reducing the size of companies are not likely to be carried out because major EU members such as France and Germany are against them. Even if Gazprom finds it difficult to acquire new energy assets in Europe, proceeds from gas exports to the EU are much more important for it and for the Russian budget. Gazprom's strategy is to build up its gas exports to Europe in the next few years. Despite the talks on gas supplies to China and Korea, the company still considers Europe its number one market. For the most part, gas exports will be based on long-term contracts. Judging by everything, it appears that Russia's role as an energy supplier of Europe will keep growing. However, experts are divided on the feasibility of Gazprom's ambitious plans. Some of them are confident that they will be carried out if apart from long-term contracts Gazprom attracts serious European investors. Others believe that it will be very difficult to build up exports because of the rapidly growing domestic demand for fuel.

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