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.
Later Friday, Gazprom also confirmed it has formed a strategic partnership with Shell across all segments of the gas industry, which may include a potential asset swap.
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.
Gazprom later Friday said the other agreements signed with Shell will offer opportunities to expand the portfolio of the joint projects which will look at the upstream and downstream segments.
In addition, Gazprom and Shell have signed a memorandum on implementing the project for constructing the third process train at the liquefied natural gas plant within Sakhalin II field in Russia. According to the memorandum, Gazprom will supply additional gas from the volumes produced by Sakhalin III project in order to secure full load of the third process train, it said.
"The project for constructing the third process line of the LNG plant within the Sakhalin II project can make a great contribution to Gazprom's strategy for LNG production and sales as well as to reinforcing the company's stance in the Asia-Pacific markets," said Gazprom.
"The document reflects the parties' firm commitment to making the project a reality, and it also proves the relevancy of the project's transition to the investment phase," said Gazprom.
Shell 'A' shares were flat 1,843.50 pence per share late Friday, whilst 'B' shares were up 0.2% to 1,875.32p.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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