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Gazprom Swaps Pipeline Gas in Europe for LNG Cargo Delivery to Cove Point

In a four-company transaction announced Wednesday, Russia's Gazprom completed its first swap of pipeline gas for an LNG cargo with Gaz de France, Med LNG & Gas and Shell. Under the deal, Gazprom will deliver additional pipeline gas to Gaz de France in Europe and in return will purchase an LNG cargo from Med LNG & Gas, a joint venture of Gaz de France and Sonatrach. The LNG cargo is being sold to Shell Western LNG for delivery to the Cove Point import terminal in Maryland, in early December.

"With these agreements, Gazprom has shown that by leveraging our position in pipeline gas in Europe, we are able to access global gas markets with Russian gas by swapping pipeline gas for LNG," said Alexander Medvedev, deputy CEO of Gazprom. "This is a unique way of creating LNG out of Russian pipeline gas and moving it to foreign markets.

"Building new relationships with LNG partners while expanding our existing partnerships in Europe has given us the platform to expand our LNG business in the years to come and will accelerate Gazprom's global growth in new markets such as the United States."

Gazprom, the world's largest natural gas company, has been actively courting U.S. LNG partners in recent months. The Russian company sold its first U.S. LNG cargo to Shell in September. Sempra officials indicated in August that Gazprom could be among the companies taking capacity at the Cameron LNG terminal, which is being built in Southern Louisiana. TransCanada and PetroCanada's Cacouna LNG project being planned at Gros Cacouna in eastern Quebec on the St. Lawrence Seaway has signed a tentative agreement with Gazprom on long-term supplies from Russia.

Gazprom is working with a number of companies to produce and liquefy natural gas from the 113 Tcf Shtokman field in the Barents Sea for export to U.S. markets. It has signed preliminary agreements with ChevronTexaco Corp., ConocoPhillips, Exxon Mobil Corp., PetroCanada, Norway's Norsk Hydro and Statoil and others. The company signed an agreement with PetroCanada a year ago for development of a liquefaction facility near St. Petersburg, Russia in the Baltic port of Ust Luga.

Gazprom is 38% owned by the Russian Federation. The company employs 330,000 people in Russia and has supplied gas to mainland Europe for 30 years. Gazprom Marketing & Trading is the UK arm of OAO Gazprom. The company was established in 1999.

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