Gazprom Bid for Serb Petroleum Monopoly Splits Serb Govt

Dec 31, 2007 (Dow Jones Newswires)

OAO Gazprom's (GAZP.RS) offer to take control of Serbia's state-owned petroleum monopoly has divided the Serbian government and sounded alarm bells about the cost of Moscow's political support, The Financial Times reports Monday.

The Russian state-run gas group aims to pay $400m for 51% of Petroleum Industry of Serbia, or NIS, without facing rival bidders.

Mladjan Dinkic, Serbia's economy minister, called the offer to pay less than half of NIS's $1.2 billion book value "humiliating", even though Gazprom would also invest $500m from 2008 to 2012.

The terms of the offer, which the Serb government has confirmed is under negotiation, would be sweetened by Gazprom's promise of a branch of the South Stream gas pipeline running through Serbia, ensuring lucrative transport fees and lower gas prices for the country for decades to come. But critics said the branch's limited capacity of 10 billion cubic meters would just cover local needs, while larger-scale gas shipments to Hungary and western Europe - which earn substantial revenues - wouldn't go through Serbia.

The Russians have also promised to boost Serbian 'energy stability' by activating a gas storage site. In return Gazprom, its subsidiary Gazpromneft and NIS would retain a monopoly on refining and a protective ban on private-sector oil and gas imports for five years.

Dec 31, 2007 (Dow Jones Newswires)