LONDON (Alliance News) - OAO Gazprom, the Russian gas giant Friday said it has signed a memorandum with oil giant Royal Dutch Shell PLC and E.ON to jointly develop two gas pipelines that will stretch from Russia to the German coast via the Baltic sea to deliver Russian gas to Europe.
Political tensions between Russia and the West and the sanctions implemented against the country over its actions in Ukraine have not halted all business. Earlier Friday, BP PLC reaffirmed its commitment to Russia by signing production, exploration and refining deals with Russia's Rosneft.
Gazprom, Shell and E.ON have signed the memorandum for the construction of the two pipelines which will have a capacity of 55.0 billion cubic metres of gas per year.
"Considering the drop in domestic gas production in Europe as well as the global growth in gas demand, the parties pointed out the need to create new infrastructure to secure reliable supplies of the eco-friendly fuel to European consumers," said Gazprom Friday.
The three companies will set up a joint venture company to facilitate the project and deal.
"Upon commissioning of the Nord Stream gas pipeline, Gazprom has been looking into the possibility of boosting the capacity of this route. Today, jointly with our partners, we are starting this project. Extra gas transmission facilities along the shortest route connecting gas fields in Russia's north to European markets will provide for higher security and reliability of supplies under new contracts," said Gazprom.
Shell 'A' shares were up 0.1% to 1,846.00 pence per share whilst 'B' shares were up 0.3% to 1,877.50p.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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