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Gazprom to buy Central Asia gas
MOSCOW, Russia (Reuters) -- The world's largest gas firm, Russia's Gazprom, said Thursday it had signed a huge long-term gas import deal with Central Asian Turkmenistan to help Gazprom supply its Western customers. Under the deal, ex-Soviet Turkmenistan will sell Gazprom six billion cubic meters (bcm) of gas from 2004, with volumes set to rise to 10 bcm from 2006 and to 80 bcm from 2009. The 25-year deal, which comes into force next year, was signed on the sidelines of a summit between Russian President Vladimir Putin and Turkmen President Saparmurat Niyazov. Analysts said Turkmenistan, which sits on one of the world's largest gas reserves, will benefit by gaining an export market at a reasonable price. Gazprom will use the deal, which will eliminate Turkmenistan as a potential competitor on European markets, to postpone costly gas projects in Russia's Arctic. Gazprom agreed to buy Turkmen gas for $44 per 1,000 cubic meters, paying 50 percent in cash and 50 percent in equipment to develop Turkmenistan's gas sector. "By signing this deal Gazprom both won and lost," UFG energy analyst Pavel Kushnir told Reuters. He said it was good for Gazprom to finalise the contract at last, after nearly two years of negotiations, but it had been signed on Turkmenistan's terms. Gazprom never wanted to pay more than $25-27 per 1,000 cubic metres. But local news agencies quoted Gazprom CEO Alexei Miller as saying that from 2007 Gazprom and Turkmenistan would apply a regular Western formula, tying up gas prices to international oil and refined products prices. UFG's Kushnir said that half of the payment would be done in equipment to help develop Turkmenistan's ageing gas pipelines. Gazprom, which supplies Europe with one fourth of its gas needs, sells gas in Europe at $90-$120 per 1,000 cubic meters, but at just $21.5 at home, where prices are capped by the state. "This is a good compromise for both Gazprom and Turkmenistan," said Troika Dialog analyst Valery Nesterov. He said Turkmenistan had a huge gas potential but was geographically too far from European markets. "Turkmenistan has solved a very important economic problem: it has sold its gas for the next 25 years," Nesterov said, adding the volume contracted with Gazprom would represent the bulk of gas produced by the country. Turkmenistan relies heavily on gas export revenues but its main gas export market now is cash-strapped ex-Soviet Ukraine. Interfax news agency quoted Niyazov as saying his country would earn $200 billion throughout 2028 by supplying Gazprom up to two trillion cubic meters of gas, while Russia's benefit would be around $300 billion. "This is a major breakthrough in the gas relationship between Russia and Turkmenistan. It will determine the relationship between the two leading gas nations for the next quarter of a century," Miller said in a statement. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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