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Gazprom faces Euro-consortium for SPP

The prospect of tough negotiations with Poland over the route of a new gas pipeline from Russia formed the backdrop to news on September 11 that European giants Ruhrgas, Gaz de France and SNAM will form a consortium to bid for a 49% state stake in gas distributor Slovenský plynárenský priemysel (SPP).
Following a meeting with Economy Minister Ľubomír Harach, the gas firms confirmed that the consortium would be formed - a move that many analysts had expected. However, any celebrations on the part of the German-French-Italian grouping had been dampened only days before when Minister Harach returned from an inter-governmental meeting in Moscow to discuss plans for a new pipleine running from Siberia through Poland and Slovakia.

The prospect of tough negotiations with Poland over the route of a new gas pipeline from Russia formed the backdrop to news on September 11 that European giants Ruhrgas, Gaz de France and SNAM will form a consortium to bid for a 49% state stake in gas distributor Slovenský plynárenský priemysel (SPP).

Following a meeting with Economy Minister Ľubomír Harach, the gas firms confirmed that the consortium would be formed - a move that many analysts had expected. However, any celebrations on the part of the German-French-Italian grouping had been dampened only days before when Minister Harach returned from an inter-governmental meeting in Moscow to discuss plans for a new pipleine running from Siberia through Poland and Slovakia.

Moscow has been pressing for Slovak help in assuring the construction of the new pipeline, to run from the Yamal oilfield in Siberia across Poland and into Slovakia, bypassing an existing one that runs through both central European states and the Ukraine. The new line would cut out the Ukriane, which Russia claims has been stealing gas for many years.

Harach admitted September 7 that construction of the new pipeline, which analysts believe will help secure SPP's position as the world's second largest gas distributor and raise its price before privatisation early next year, would be impossible unless Warsaw can be won round.

"If Poland says no, then we will not have [the pipeline]," Harach said after the talks in Moscow.

Ministry spokesperson Dagmar Hlavatá added: "We believe that the issue of the new pipeline is very fragile. There won't be any special discussions on this topic between Poland and Slovakia unless Russian, Polish and Ukrainian officials clarify their countries' roles in this project. Slovakia won't do anything that would harm relations with its neighbours."

Warsaw made it clear in August that it would not be willing to support construction of the new pipeline bypassing Ukraine. Close links in the fuel and energy sectors between the two countries have, analysts say, been behind the reluctance to see a new route for gas across central Europe laid down.

"Poland and the Ukraine have some important partnerships [in this sector], and the new pipeline would really diminish the importance of the Ukraine [in the European gas transit market]. Poland seems reluctant to let this happen," said Dušan Meszaros, energy sector analyst at Commerzbank Capital Markets in Prague.

Russian pressure

In early March this year, the Russian gas giant Gazprom, which has also announced its interest in purchasing the 49% stake in SPP, sent a letter to the Slovak government inviting it to participate in construction of the new pipeline. However, just days before that, Gazprom officials appeared to have been trying to force the Slovak government into a corner.

Jurij Komarov, Gazprom deputy director, told local media at the time that "although logic dictates that we would diversify our export channels by building regional connections, the uncertainty of Slovakia's and Poland's position [on the route of the pipeline] may force Gazprom in the very near future to launch the construction of a so-called northern pipeline [an alternative route through the Baltic states]. This step would obviously eliminate Slovakia as a transit country."

Russian diplomatic officials later denied that any undue pressure was being put on Slovakia.

Ironically, the latest developments with the new pipeline are likely to lead to Russia's Gazprom having to pay a very high price for the 49% stake if it manages to beat off competition. Harach said September 7 that the construction of the pipeline would be dependent upon the entry of a strategic partner into SPP, with the state reluctant to foot the entire bill for the pipeline's construction.

With any route secured through Slovakia, the value of SPP is expected to grow and, the economy ministry said, be reflected in the price of the stake. "We can say that this project would be very good for SPP as it could widen its network and use spare capacity to distribute more gas. If SPP goes into this project it will increase its value, and that's why it will reflect on the price of the stake offered in the tender," Hlavatá said.

The government has slated the sale process of the 49% stake, for which it is asking 100 billion crowns ($2.12 billion), to begin in April 2001. Despite what the economy ministry itself confirmed was interest from a Canadian and an American firm, the battle for the stake is now expected to be between Gazprom and the new European consortium.

"The main players in this privatisation game will be the consortium and Gazprom, because SPP is of great value to both. The consortium serves as SPP's customer, and Gazprom as SPP's supplier," said Commerzbank's Meszaros.

SPP declined to comment on any speculation about a two-horse race developing for the state's stake. "There are other parties involved," a spokesperson for the firm said.

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