MOSCOW—Russia's state gas firm OAO Gazprom signed a preliminary
deal with three European companies to expand a pipeline to Germany,
aiming to cement the company as the European Union's main gas
supplier even as it faces antimonopoly charges there.
The tentative agreement was the flagship deal signed Thursday at
the annual St. Petersburg International Economic Forum, where
Russian officials touted participation by foreign executives as a
sign the country hadn't been isolated by Western sanctions.
Gazprom said the planned project with Royal Dutch Shell PLC,
Germany's E.ON and Austria's OMV AG would double the capacity of
the Nord Stream pipeline that runs from Russia to Germany via the
Baltic Sea and was opened in 2011. The companies gave no time frame
for the expansion, but Gazprom said they would form a consortium,
with the Russian company holding 51%.
The proposed expansion is Gazprom's latest attempt to reduce its
reliance on Ukraine for transiting gas to Europe, its most
lucrative market. Disputes between Ukraine and Russia have caused
cuts in gas deliveries to Europe twice in recent years.
Gazprom Chief Executive Alexei Miller said the proposed
expansion would make deliveries to Europe, which receives one-third
of its gas imports from Russia, more secure and reliable.
But some analysts and Western officials questioned the proposed
expansion's viability.
Gazprom has faced increased regulatory pressure in recent years
in Europe. The EU filed charges against Gazprom in April, saying
the company abused its dominant position in some eastern and
southern European countries' markets. Gazprom could face a
multibillion-dollar fine over the charges, which it denies.
Late last year, Gazprom canceled another pipeline project,
called South Stream, that was to deliver gas to southeastern
Europe, after the EU blocked construction on competition
grounds.
Any further pipelines will face regulatory hurdles under EU
competition legislation. The current Nord Stream pipeline is
running at around two-thirds capacity due to EU competition rules.
Gazprom spokesman Sergei Kupriyanov said the company aimed to
resolve such questions through talks with the EU.
Gazprom is also aiming to build another pipeline, called Turkish
Stream, to southeastern Europe under the Black Sea, then via
Turkey.
The EU is aiming to reduce reliance on Russian gas, so "it makes
no sense to build both projects," said Alexander Kornilov, an
energy analyst at Alfa Bank in Moscow.
The decision to try to expand Nord Stream "indicates that they
understand that the four-line Turkish Stream by 2020 is not going
to work and that they need other options," said Jonathan Stern, a
senior fellow at the Oxford Institute for Energy Studies.
"Gazprom needs some kind of backup project in case Turkish
Stream fails," Mr. Kornilov said.
Still, the Greek and Russian energy ministers are set to sign a
memorandum Friday proposing construction of a pipeline that would
feed gas from Turkish Stream into Europe.
Russia's energy minister Alexander Novak said Thursday that
Russia and Turkey would sign an agreement on the construction of
the first line of Turkish Stream by the start of July.
Gazprom spokesman Mr. Kupriyanov said expansion of Nord Stream
would double its capacity to 110 billion cubic meters of gas a
year. Along with Turkish Stream, that would allow Russia to stop
sending gas via Ukraine, he said. Gazprom delivered 146.6 BCM of
gas to Europe last year.
Nektaria Stamouli and Olga Razumovskaya contributed to this
article
Write to James Marson at james.marson@wsj.com
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