Wednesday, May 6, 2009

The Rebirth of Middlemen for Russian Gas

The arranged demise of RosUkrEnergo (RUE), the intermediary of Russian gas, after the Russian/Ukraine gas dispute in January 2009 was meant to bring clarity to purchasing Russian gas. The contracts held by RUE involved deals with Hungary's Emfesz and Poland's PGNiG. With the shutting down of the company these buyers have had to find another way of buying gas from Russia. It seems though that the role of intermediaries is not over.

You would think - well, depending how long you thought for - that you could just go to Gazprom and buy the gas that you needed. I mean, who else sells gas in the quantities that a domestic supplier needs in CEE? PGNiG is pursuing this strategy by agreeing to buy gas from Gazprom according to newsreports:

May 4, 2009
Rzeczpospolita, 29 Apr 2009, online:- Polish newspaper Rzeczpospolita has found out that the Polish national oil and gas concern PGNiG, which estimates its gas supply shortage at 2.5 billion cubic metres, is not going to accept the gas supply offer of the Hungarian Emfesh (sic), as it prefers to buy gas directly from a producer rather than from an intermediary.

The brief article goes on to say that PGNiG is in talks and early agreement with Gazprom. But we'll have to wait and see what entity the deal is inked with. BECAUSE, it is interesting to note that a) Emfesz was even bidding to supply gas to PGNiG and b) that Emfesz just announced that it would be buying gas from RosGas AG. According to Emfesz and this analysis by Roman Kupchinsky in his posting from the Jamestown Foundation, RosGas AG actualy belongs to the owners of Emfesz and Gazprom. However, this connection to Gazprom has been denied by Gazprom, as Kupchinsky explains and disputes.

At this point, there are a lot of loose ends and I'm not sure how to draw a conclusion about this. I can only say that it is interesting that Emfesz was bidding to supply Poland with gas when it would obviously be buying gas from Gazprom, and possibly through RosGas, which could supply the contract. We'll have to wait and see which entity PGNiG signs the contract with. Either way, the demise of RUE does not signal the end of murkey ownership and supply structure when it comes to Russian gas. Kupchinsky explains the establishment of RosGas as reward for one of Emfesz's owner for loyalty. I think there are other ways, even for Russians, to reward loyalty, we'll have to wait and see how other factors in Hungary, particularly with Russia's new interest in MOL play out. Loyalty is most effective when you are working together over the long term.