BASF, E.ON & Gazprom Ink Deal for North European Gas Pipeline

Gazprom, BASF AG and E.ON AG signed a basic agreement on the construction of the North European Gas Pipeline (NEGP) through the Baltic Sea. The parties to the agreement intend to set up the North European Gas Pipeline Company as a joint German-Russian venture, with Gazprom holding 51% and BASF and E.ON each 24.5%.

At the signing of the agreement, President Putin of Russia and Chancellor Schröder of Germany stressed the strategic importance of the project for the further development of German-Russian relations in the energy sector.

Germany is today Gazprom's largest export market. The NEGP gives Gazprom as the world's leading gas producer a further supply route to this still growing market and, in addition, improves its position as a reliable supplier in Germany and western Europe. As a result of the NEGP, Germany gains a direct link to Russia's huge gas reserves. This helps to cover the rising demand for imports in Germany and other European countries and thus reinforces their security of supply. E.ON and BASF will also procure new gas volumes via the NEGP, to which the pipeline systems of WINGAS and E.ON Ruhrgas in Germany will be linked. Consequently, they will enhance their gas procurement, which is marked by growing international competition.

The NEGP will run from Vyborg on Russia's Baltic coast to Germany's Baltic coast, the Greifswald region being provisionally earmarked as landfall. The route through the Baltic is being optimised according to technical and economic criteria. Preliminary investigations have already been carried out into the seabed structure. The pipeline will be over 1,200 km long. It is planned to be commissioned in 2010, initially consisting of a single pipeline with an annual transmission capacity of approx. 27.5billion m³. The project envisages laying a second pipeline and doubling the transmission capacity to approx. 55billion m³ per annum. The total investment for the twin-pipeline project exceeds €4 billion.

With this agreement, BASF and E.ON are implementing their respective memorandum of understanding signed bilaterally with Gazprom. The aim is to conclude detailed contracts for implementing the NEGP project in the coming months. Gazprom will already start building the land section of the gas pipeline this autumn.