BASF, Gazprom Renew Abandoned Asset-Swap Plan -- 3rd Update
September 04 2015 - 1:02PM
Dow Jones News
By Neetha Mahadevan in Frankfurt and Thomas Grove in Moscow
A multibillion-dollar asset swap between German conglomerate
BASF SE and Russian energy firm OAO Gazprom that appeared dead last
year because of strained relations between Europe and Russia is
back on, the companies said Friday.
The suspension of the deal, worth more than $13 billion,
underscored the challenge multinationals face navigating the
standoff between Russia and the West over separatist violence in
Ukraine.
But the resurrection of the German-Russian swap 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.
The U.S. and Europe Union have imposed sanctions on conducting
business with allies of Russian President Vladimir Putin and
Russian state-backed companies. The deal wasn't explicitly barred
under U.S. and EU sanctions, but the chill in relations caused many
western firms to shy away from clinching high level deals
altogether.
Neither company said what prompted the reversal now.
Gazprom and BASF 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.
The shares Gazprom will take over generated 12.2 billion euros,
or $13.6 billion, in sales last year, Interfax reported.
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 and Christian Grimm in Berlin contributed to this
article.
Write to Neetha Mahadevan at neetha.mahadevan@wsj.com and Thomas
Grove at thomas.grove@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 04, 2015 12:47 ET (16:47 GMT)
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