German firm wrangles with Gazprom over gas field

Germany energy company E.On Ruhrgas is hoping to finalise an asset swap with Gazprom for 25 per cent of the Yuzhnorusskoe gas field by the end of the year. But the chairman of E.On says it may drop the idea of buying a stake in one of Russia’s larges gas

For four years E.On Ruhrgas has been trying to become Gazprom's partner in developing Yuzhnorusskoe. The gas field has proven reserves of 700 billion cubic metres of gas.

In principle Gazprom have agreed to exchange a 25 per cent stake in Yuzhnorusskoe for E.On assets in Europe but so far the two parties have failed to agree terms.

Bernhard Reutersberg, Chairman of E.On Ruhrgas, says the value of Yuzhnorusskoe depends on oil prices.

“If you look at the development of these prices within the last four years, then of course you’ll see that this gas field is increasing in value. And, of course, you need to fill the gap with new assets”.

In December last year E.On offered Gazprom its European electricity production assets and underground gas storage facilities. After almost six months Gazprom announced that the structure of the assets had once again been changed.

E.On’s Reutersberg says the negotiations can’t continue forever.

“They will be over when we come to a solution or if we have no hope that there will be a solution. Both options are possible, but I’m positive that we’ll come to an agreement this year”.

Gazprom says it will finalise the deal with E.On this year. But as energy prices continue to grow, market watchers doubt that the two parties will agree on asset valuation any time soon.