The world media report that the European Commission didn’t let Gazprom buy 50% share of Central European Gas Hub (GmbH) - CEGH. This is one of Europe’s most important natural gas hubs. 80% of it belongs to Gas&Power GmbH OMV (Austria), the remaining 20% belongs to Wiener Borse AG. In terms of trading volume, CEGH buys/sells about 2Bcf of gas a month, 80% of which is of Russian origin. The mentioned marketplace satisfies the demand of Australia and other European countries.
Investment offer: preparation details
According to the Russian Association of Traders and Investors under Gazprom started planning the purchase of a part of CEGH in 2008. At that time CEGH completely belonged to OMV while the Austrian concern was going to sell 30% of its stock to Gazprom:
1. The appearance of other interested parties. According to the initial plan, OMV decided to leave only 30%. The remaining 40% was planned to distribute between Centrex and Wiener Boerse.
2. The strengthening of Gazprom’s stance. Later Centrex got under the control of Gazprombank. In this case, if Gazprom had made a deal it would have received 50% of the shares of Central European Gas Hub.
3. The Austrian concern’s benefit. If the deal had been concluded CEGH would have turned into Central Europe’s biggest marketplace dealing in natural gas.
4. Gazprom’s benefit. Gazprom planned to gain extra profits. CEGH’s trading volume grows year by year. In 2007 17,7Bcf was sold via CEGH, in 2010 - 33,8Bcf. Moreover, the creation of Central-European gas marketplace would give Gazprom an opportunity to reach final consumer, which would mean extra profit.
5. The deal was to be concluded on 2009. At that time some officials and experts started worrying that Gazprom could use CEGH to manipulate Europe’s gas prices.
6. According to some Gazprom representatives, the EU authorities didn’t ban the Russian gas monopolist from participating in the project. But the Euro Commission laid down such unacceptable conditions that Gazprom had to abandon the idea.
Tips for investors: what is the reason for the denial?
According to Alexander Medvedev, Deputy Chairman of the Board of Executive Directors of Gazprom, noted during a press conference that the Euro Commission had thought Gazprom was going to “enslave” Europe by means of the gas hub:
· Gazprom’s aspiration to gain monopoly in Europe. According to numerous experts, the Euro Commission was probably worried that Gazprom already was in control of over 25% of gas supplies to Europe through long-term contracts. An acquisition of the marketplace in Central Europe could give the Russian monopolist another edge.
· Breaching the key market law. If the manufacturer of a certain product starts controlling the marketplace where the product is traded, it gets an opportunity to influence the market, breaching the key law of market economy - free competition. According to the EU legislation, gas producers are forbidden to act as traders in gas exchanges.
· The EU has a special attitude towards Gazprom, suspecting it of some political games.
· The peculiarities of the object of trade. The thing is that CEGH is mainly used for spot trading (one-shot supplies to final consumers who desperately need energy carriers). Such marketplaces are used mainly in winter (when the demand for gas dramatically increases). Probably, the Europeans do not want to completely depend on the Russians in terms of energy security.
· Reaching final consumers. Central European Gas Hub is not just an exchange. It assets include a massive storage of gas located in Baumgarten (Austria), which in its turn makes it possible to reach final consumers. It can finally free Gazprom’s hands while most European countries are trying to agree with the Russian gas monopolist on some price cuts.
· The growing export of the Russian natural gas to Europe. Another reason why the Euro Commission didn’t let Gazprom purchase the hub was the record high volume of Gazprom’s gas supplies to the EU. In Q1 2011 the year-to-year increase reached 12%, in April – 20%, in May – 30%. In general over the first 5 months of 2011 the export grew by 17%. After the nuclear disaster in Japan numerous European coteries - including Germany and Austria – decided to abandon nuclear energy, which will eventually increase the imports of alternative energy carriers. Consequently, Gazprom will strengthen its positions in Europe. Under such circumstances the EU authorities do not want to give Russia any extra trump cards.
Gazprom keeps strengthening its positions in the international market. It is time for investors to evaluate the company’s perspectives. According to the Department of Market Sentiment Analysis of , the price Gazprom’s shares (GAZP) is currently retracing against the major uptrend. At this point the quotes are around the intersection of a sloping channel of Daily and an upward sloping channel of the junior timeframe. The situation will clarify when the price comes out of one of the mentioned sloping channels:
· A rebound from the bearish sloping channel and a downswing below 202 rubles will give way to further weakening down to 190 – 189 rubles (the red arrow)
· A break above the downward SC and consolidation above 202 rubles will make it possible to anticipate a rally up to the area of 216-217 rubles (the green arrows).
Market Leader and offer all comers to discuss the topic. Please, visit the Academy’s forum and give an answer to the following question:
How can you describe the Euro Commission’s decision to bar Gazprom from purchasing CEGH’s shares?
· Lawlessness explained by Russophobia
· An adequate reaction of those who take care of their security
· The rules are the same for everyone. The EU tries to adhere to them.
