Gazprom building strategic alliance with expanded Shell

St Petersburg (Russia), June

19: Gazprom is building a global strategic alliance with energy major Royal Dutch Shell that will include asset swaps and allow the Russian gas giant to penetrate new markets, its chief executive told Reuters.

Gazprom, the world's top gas producer, said on Thursday that Shell and its long-time gas buyers in Europe – Germany's E.ON and Austria's OMV – had agreed to build two new Nord Stream gas pipelines under the Baltic sea to Ger many.

In a rare interview, chief executive Alexei Miller said the agreement with Shell also foresaw an expansion of the firms' joint $20 billion liquefied natural gas plant on the eastern island of Sakhalin as well as global upstream asset swaps.

“Documents of such significance are signed only once every five years or maybe even 10,” Miller said on the sidelines of Russia's top forum for investors in Saint Petersburg.

The deal with Shell is a coup for Gazprom at a time when many Western companies are reducing their exposure to Russia because of Western sanctions over Moscow's actions in Ukraine.

Gazprom, which is under US but not EU sanctions, is fighting for market share in Europe in the face of increasingly oversupplied gas markets, and is locked in a long-running dispute over payments to Europe with conflict-stricken Ukraine.

“Many of our traditional partners are positioning themselves as strong regional players... Shell is a global player. And as the global gas markets develop... we will be creating a global strategic partnership,” said Miller.

Shell agreed to buy smaller rival BG for $70 billion plus

Gazprom said Shell and its long-time gas buyers in Europe – Germany’s E.ON and Austria’s OMV – had agreed to build two new Nord Stream gas pipelines under the Baltic sea to Germany. The deal is a coup for Gazprom at a time when many Western companies are reducing their exposure to Russia

debt earlier this year and Miller said the deal was adding extra potential to cooperation, such as upstream asset swaps between Gazprom and the Anglo-Dutch giant.

“The deal will take some time to materialise. Shell for instance needs to become the full owner of BG,” he said. “We plan that next year we could sign such a deal in St Petersburg at the same forum.”

Shell needs to win anti-monopoly clearance for the BG purchase from authorities in Brazil, Australia and China where it already has a very significant presence.

"We know about Brazil, Australia and about the Asian market. And that allows us to talk about a global partnership," Miller said.