E.ON and Gazprom Strike Deal on Yuzhno Russkoye

German utility giant E.ON and Gazprom on Wednesday signed a framework agreement on the exchange of assets in the sectors of gas production as well as gas sales and trading and power. E.ON is acquiring a stake of 25% minus one share in the Yuzhno Russkoye gas field in Siberia.

Yuzhno Russkoye, with reserves of more than 700 billion cubic meters, is one of the world's largest gas fields. Production is set to begin next year, and annual output reportedly will reach up to 25 billion cubic meters. This gas quantity is equivalent to the annual consumption of more than 10 million households.

Through the minority stake in Yuzhno Russkoye and construction of the North European Gas Pipeline, as agreed with Gazprom and BASF, E.ON and Gazprom are making an important contribution to strengthening security of supply for the European gas market. Russian gas will become even more important as European gas demand continues to rise and western European production declines. The gas volumes from the stake in Yuzhno Russkoye and from existing gas fields in the North Sea amount to roughly 15% of the gas supplies of E.ON Ruhrgas.

In return for the stake in Yuzhno Russkoye, Gazprom is receiving minority interests of 50% minus one share in the Hungarian gas companies E.ON Földgaz Storage and E.ON Földgaz Trade, a stake of 25% plus one share in the regional power and gas supplier E.ON Hungaria, and other compensation. In addition, E.ON and Gazprom have agreed to work together on specific gas-fired power station projects in Europe.

E.ON and Gazprom plan to conclude a detailed agreement on the exchange of assets by year’s end. The envisaged Gazprom shareholdings in Hungary are subject to approval by the EU Commission and Hungarian authorities.

“Participation in Yuzhno Russkoye extends and deepens our long-standing partnership with Gazprom,” said Wulf H. Bernotat, E.ON’s CEO. “Against the background of rising demand we are taking precautions to ensure that enough gas will be available in Europe in the future, too. E.ON and Gazprom are thus making an important contribution towards durably enhancing security of supply in Europe.”