BELARUS NEWS AND ANALYSIS

DATE:

24/11/2006

Lukashenko Yields to Gazprom

Another round of negotiations on gas deliveries to Belarus is slated for today, November 24, 2006. Belarus is ready to swap a half of Beltransgaz for annually producing 10 billion cu meters in Russia, Belarus' President Alexander Lukashenko said Thursday.

Today, Russia's Prime Minister Mikhail Fradkov will hold in Minsk one more round of negotiations on gas suppliers to Belarus. On the same day, Minsk will host another talks, which will involve Gazprom, Beltransgaz and Dutch ABN Amro, Belarus' Vice Prime Minister Vladimir Semashko announced yesterday. ABN Amro will provide its evaluation report for Beltransgaz.

But this get-together of Gazprom, Beltransgaz and ABN Amro will be a mere presentation with the actual talks to be conducted in Moscow in early December.

Semashko said that, "with political will," Belarus and Russia will create by the year-end a joint venture, on which the success of the taks depends.

Belarus annually consumes around 20 billion cu meters of gas. The project annual capacity of Beltransgaz is 51 billion cu meters; the capacity via Yamal-Europe pipelines is 33 billion cu meters. This year's transit to Poland and Ukraine is preliminary estimated at 44 billion cu meters.

Gazprom presses for delivering gas to Belarus at the market prices starting from 2007 with the basic rate of at least $200/ths cu meters. The higher prices could be offset by the venture, where the value of Gazprom's share would be taken into account while fixing gas prices. But so far, the parties have been unable to agree on Beltransgaz worth and ABN Amro was attracted exactly to evaluate the assets.

Last week, Belarus' President Alexander Lukashenko officially announced that ABN Amro's report would be just a conditional point to begin with and assessed Beltransgaz at $10 billion to $17 billion.

As there is no way to align commercial positions of Belarus and Gazprom, the ultimate decision will be political.

Yesterday, Lukashenko threatened to make up for higher gas prices by introducing duties on gas transit from/to Russia and pledged to accept any price "no matter $50/ths cu meters or $120/ths cu meters" should it be the same in Russia.

On the other hand, Lukashenko suggested giving a half in Beltransgaz for producing 10 billion cu meters of gas in Russia. The analysts say a venture with the annual output of 10 billion cu meters will cost $4.3 billion in terms of oil equivalent.

Of interest is that Ukrainian Fuel and Energy Minister Yury Boiko arrived in Moscow yesterday to canvass with Gazprom CEO Alexey Miller the possible increase in gas transit via Ukraine.

According to analysts, the market price for Belarus will be between $90/ths cu meters and $120/ths cu meters but it calls for a political decision that hasn't been made yet. So, in view of expected surge in domestic gas prices in Russia, the basic condition of Belarus president will be probably met in the end.

Source:

http://www.kommersant.com/p724507/gas_price_Belarus/