Sunday Express: Shell tipped to join Baltic gas pipeline

Sunday Express: Shell tipped to join Baltic gas pipeline: “Shell is thought to be the most likely partner.”

By Robin Pagnamenta

8 August 2004

GAZPROM, the Russian energy giant, is seeking a UK partner for an ambitious multi-billion-pound plan to supply Siberian gas to western Europe via a pipeline across the Baltic Sea.

Gazprom is already understood to have approached Royal Dutch/Shell, BP and Centrica. Although no company has committed to the project, Shell is thought to be the most likely partner.

US investment bank Goldman Sachs is said to be advising on the deal, according to energy industry sources.

The pipeline is expected to cost up to $6 billion (£3.3 billion) and would involve the construction of a 1,875-mile link from northern Russia to Germany with offshoots to the UK, Finland and Sweden. Construction is unlikely to be completed before 2010.

A spokesman for Shell said the company viewed the pipeline as a “potentially favourable option” for expanding transportation capacity.

“Gazprom and Shell are conducting discussions on the development concept and on the possibility of future co-operation in the project,” a spokesman said.

Shell is working with Gazprom on other projects although another venture to build a pipeline from Russia and China has foundered.

With supplies of North Sea gas dwindling, there is likely to be growing demand from western Europe for gas from Russia and north Africa.

Several countries and companies are exploring options to build the infrastructure needed to deliver these supplies.

Gazprom, the world’s largest gas producer, is keen to find ways of boosting supplies to Europe by at least 50 per cent during the next decade. It also aims to reduce its reliance on road and rail transit via Ukraine and Belarus.

Ian Woollen, senior analyst at Wood Mackenzie in Edinburgh, says: “Clearly it’s a very expensive project so it is looking for partners to share the cost.”

Last month the Russian group signed a memorandum of understanding with German utilities giant E.On. A joint statement mentioned gas exploration and power generation in Russia, gas transportation to Europe and the development of gas and electricity distribution and sales infrastructure in Europe.

Currently they are the only two companies involved in the project but “it is not unlikely that partners will join”, the statement said.

Gazprom is also understood to have held talks with Holland’s Gasunie, Total of France and Fortum of Finland.

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