What is Gazprom's strategy in Great Britain?:
Vitaly Vasilyev, general director of Gazprom Marketing & Trading, a subsidiary of Gazeksport, appeared before the British parliament yesterday. He tried to convince the British politicians that the monopoly's presence on the country's gas and electric markets will not threaten its energy security. A few hours before his appearance there, Vasilyev explained to Kommersant correspondent Natalia Grib that, until Gazprom finds common ground with the British authorities, there can be no possibility of purchasing the local Centrica gas distribution company.

What will you say in the Parliament?

I will appear on the invitation of parliamentary committee on trade and industry, which is responsible for the security of fuel supplies. This is the first invitation for Gazprom . Gazprom's reputation and its position on the British and Northwestern European markets depends on whether or not I can convince the parliamentarians of the correctness of out strategy and tactics. Gazprom Marketing & Trading plans to increase supplies to the country. In 2005, we sold 4.5 billion cubic meters, of which 2.7 billion were Russian and the remainder from Belgium and Holland. Eventually, Gazprom Marketing & Trading will supply gas from Norway and the North Sea, as well as long-term Gazprom contracts. We are not now talking about the purchase of companies such as Centrica that are integral parts of the British gas and electric system. First we have to ease the doubts of British society and convince it that Gazprom Marketing & Trading works on European standards and that it in now way differs from French or German companies. We have to build a system of relations with the British parliament and government like other European companies have.

What is Gazprom's strategy in Great Britain?

The presence of Gazprom in Great Britain was determined in 1994 when the decision was made on share participation in the Interconnector gas pipeline between Britain and Belgium. The pipeline began operating in 1998 and that was when the idea of forming a supply operator company came up. In 1999, Gazprom UK Trading was founded and, in 2004, Gazprom Marketing & Trading was formed from it. Then Gazprom adopted a new strategy – increasing its presence in North and Northwest Europe and occupying 10-15 percent of the gas market in Great Britain, Holland, Belgium and France. We also have to diversify supply routes to Britain. Gazprom is participating in the purchase of BBL capacity [the gas pipeline between The Netherlands and Great Britain].

If Gazprom reaches an agreement on BBL, won't it have to extent a branch of the North European Natural Gas Pipeline from The Netherlands to Great Britain?

Yes. With 5 billion cu. m. capacity in Interconnector and another 2 billion cu. m. in BBL, we have to organize supplies of 3-7 billion cu. m. a year to Great Britain to get 5-10 percent of the market. But the capacity of BBL can be increased.

What are the short-term plans of Gazprom Marketing & Trading?

When I took charge of the company in August 2004, five people worked for it. Today there are 70 employees and we have to increase the staff to 90 by the end of the year. We are engaged in trading in Great Britain, Holland and Belgium. In the fourth quarter we will begin trading in France. In 2007, obviously, in Ireland. In August, we plan to begin trading electrical energy on the wholesale market in Great Britain and France and, in 2007, trading financial instruments for oil and petroleum products on the London Petroleum Exchange, which we are a member of. Another direction of our business will be trading quotas on emissions of hazardous substances under the Kyoto Protocol, which we plan to begin in 2007. To increase our volume of gas sales, we will work in all sectors of the British market. Today we have just under 50 partners on the wholesale market. In a year, we will be selling up to 500 million cu. m. in France. We have agreements with several companies, but I wouldn't want to name them until supplies begin.

Gazprom didn't buy Centrica or Scottish Power. Is that decision final?

We didn't file to buy Centrica or Scottish Power. There are no negotiations on them now. We will concentrate on the businesses we have bought and continue studying the market for other companies to acquire. We already work with wholesale consumers and large industrial clients. In August, when we transfer the client base of Pennine Natural Gas to ourselves, Gazprom will begin selling gas wholesale.

But Pennine only sells 31 million cu. m. per year. What do you need that for?

Pennine's sales will rise to 100 million cu. m. this year. I agree that it is not much. The company occupies about 1 percent of the sales sector of gas to small industrial clients. Gazprom never worked in the small retail sector and this will be our first experience, but the profitability here is much higher than in industry. We plan to develop Pennine and increase its client base by ten times.

Gazprom Marketing & Trading has received access to the retail electric market in Great Britain. What do you plan to do there?

About 35-36 percent of the electricity in Great Britain is generated from natural gas and the mutual influence of gas and electricity prices is very high. In August, we will begin to trade on the electricity markets in Great Britain and France and we will practice tolling, that is, supplying gas in exchange for electricity. In 2008, that form of business should bring us £10-15 million in income. The emphasis was placed on the British market in this case since it is more liberalized. In 2007, Gazprom Marketing & Trading plans to begin trading electricity in Holland, where about 40 percent of electricity is generated from gas, although no final decision has been made on that yet.

In 2005, Gazprom Marketing & Trading delivered three tankers of liquefied gas. Was that an economic or political decision?

All transactions with liquefied natural gas are profitable. An interesting plan was implemented with Gas de France this year, when we exchanged their tanker of liquefied natural gas for the equivalent volume of pipeline gas in France. This year, we will deliver three or four more tankers. But whether that will be to the United States, Britain, Korea or Japan will depend on the situation. 26.7.06