Russia’s Gazprom close to gas deals with Azerbaijan

Gazprom: Deals near with Azerbaijan

MOSCOW — Gazprom, the world’s largest natural gas producer, said Friday it hoped to sign key deals in Azerbaijan next week, raising the possibility that Russia will secure Azeri gas to feed pipelines to Europe.

“We enjoy good relations with Azerbaijan,” chief executive Alexei Miller said at a shareholders’ meeting at the company’s Moscow headquarters. “And we hope that during next week’s trip to Baku we will reach important agreements.”

State-run Gazprom has sought in recent years to corner the Central Asian gas supply, and reached preliminary agreement in March to buy Azerbaijani gas from 2010.

According to Miller, Russian President Dmitry Medvedev will oversee the signing of a deal in Baku next week which would allow Russia to buy Azerbaijan’s gas “as soon as Jan. 1, 2010.”

Miller said Russia and Azerbaijan are discussing “relatively small amounts” of gas so far, but Russia could start buying more in the future.

“We have very good trumps compared to any potential buyer of Azerbaijan gas,” he said in a televised news conference after the company’s shareholders meeting.

Russia requires more gas to feed two planned gas export pipelines — North Stream and South Stream — that would enable it to boost supplies substantially to Europe over the next decade.

The European Union is backing a rival Europe-bound pipeline project called Nabucco that would hook up Central Asian or Middle Eastern gas with a pipeline in Turkey. The project has progressed slowly, however, because its investors have not yet secured supplies to fill it.

Miller warned that cutting out Russia and seeking gas directly from Central Asia or the Middle East would result in less stable supplies.

He suggested that the countries Europe is courting are politically unstable and lack experience in servicing and managing international pipelines. He did not mention any specific countries.

Striving to diversify, Miller said, is understandable, but could lead paradoxically to less stable supply. He warned against Europe’s seeking alternative suppliers to Russia “turning into a fetish.”

Miller also confirmed plans to slash Gazprom’s $29.4 billion investment program by 30 percent this year, saying “there will not be enough demand for the planned capacities.” He rejected claims that Gazprom lacked the financing.

Gazprom faced flagging demand in the fourth quarter of 2008 and early this year. However, Europe’s uptake has recently reached last year’s levels, Miller said.