Gazprom: no bid for British Gas owner yet

Russian state-owned firm 'to focus on own projects'
· Move comes as ministers dismiss security worries

Terry Macalister
Thursday April 27, 2006
The Guardian


Gazprom, the Russian state-controlled gas supplier, said yesterday it was concentrating its efforts on its own new projects, as it sought to dampen expectations that it would bid for the British Gas owner Centrica - or any other energy firm - for the rest of the year and much of 2007.
The decision is a setback for Centrica whose shares rose 5% early yesterday on the back of speculation that the biggest gas company in the world was poised to make a takeover bid.


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It came despite reassurances from the British trade and industry secretary, Alan Johnson, that Gazprom would not be barred for security reasons from any corporate acquisition in this country.
The potential for Gazprom to make sizeable takeovers increased yesterday when a change to its weighting in the MSCI Emerging Markets Index sent its shares racing 8% higher to $11.20 on the Moscow stock exchange.

This means the Russian company is now valued at $265bn - more than BP - making it the second biggest energy company in the world behind ExxonMobil. It was also last night the fourth largest publicly-traded company in the world after Exxon, General Electric and Microsoft - though the Russian government owns more than 50% of the group.

A source close to Gazprom dismissed the City excitement around Centrica shares. "We are looking at Centrica and many other companies but it seems like this year or next there will be no acquisitions," said the source.

The British media had been trying to sell the owner of British Gas for the last 18 months but Gazprom had many other commitments which took precedence, the source said. These included developing the Stockman gas field in the Barents Sea, building the north European gas pipeline and expanding its trading and distribution networks in Britain and continental Europe, the source said.

Gazprom did believe it had in effect been given the green light by Mr Johnson. The FT yesterday quoted "allies" of Tony Blair saying the prime minister would be happy for any bid to be dealt with by Britain's independent competition authorities.

George Soros, the billionaire financier, warned yesterday neither Mr Blair nor other European leaders should underestimate the dangers Gazprom posed to energy security. "Mr Putin put his own man, Alexei Miller, in charge of Gazprom and pushed out the previous management that had built a private fiefdom out of Gazprom's properties," he wrote in the FT. "The president did not dissolve the fiefdom but used it to assert control over the production and transportation of gas in neighbouring countries."

Mr Soros took the Russian president to task over the planned flotation of oil group Rosneft in London. Rosneft was the main beneficiary of the assault on Yukos and its founder, Mikhail Khodorkovsky, who is now in jail.

The flotation of Rosneft, which acquired 70% of its production through the controversial takeover of Yukos's Yuganskneftegaz, "raises serious ethical and energy security issues", said Mr Soros.

The energy world was shaken at the turn of the year when Gazprom turned off gas supplies to the Ukraine at a time of freezing temperatures. The Russians argued that it was a natural commercial move triggered by Ukraine's refusal to agree a new contract price for 2006.

But many commentators saw it as Mr Putin flexing his muscles over a neighbouring country that had chosen to leave the family of former Soviet countries and make overtures to the US.

Gazprom's deputy chairman, Alexander Medvedev, originally started speculation racing about its British takeover ambitions during an interview with this paper. He has since reiterated the interest in Centrica and others but has always denied having held any concrete talks.





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