UPDATE 1-Rosneft challenges Gazprom monopoly to export Russian pipeline gas

Fri Mar 7, 2014 5:35am EST

Related Topics

(Adds detail, government source)

* Rosneft eyes access to future gas pipeline to China

* Rosneft raises stakes in struggle with Gazprom

By Vladimir Soldatkin and Denis Pinchuk

MOSCOW, March 7 (Reuters) - Russia's top crude oil producer Rosneft wants to break the monopoly of another state-owned energy champion, Gazprom, to export gas via pipelines, sources said on Friday, signalling a flare-up between powerful clans.

Igor Sechin, a long-standing ally of Russian President Vladimir Putin, transformed Rosneft into the world's top publicly traded oil producer through the $50 billion purchase of Anglo-Russian firm TNK-BP last year.

In a sign of Sechin's rising clout, Rosneft and Russia's largest non-state gas producer Novatek have already secured rights to export seaborne liquefied natural gas, reversing a 2006 law that gave Gazprom a monopoly on gas exports.

Gazprom still holds the exclusive rights to ship Russian gas abroad via pipelines, which connect vast Siberian gas fields with European clients. It meets 30 percent of gas demand in the European Union.

Rosneft in particular wants access to Gazprom's Sila Sibiri (Power of Siberia) pipeline designed to carry gas to China at a rate of 38 billion cubic metres a year, sources familiar with the matter said.

Gazprom has yet to sign a final deal with China on the pipeline and has delayed its launch to 2020 from 2018 expected earlier.

"It is unfair that the pipeline is designated only for one company," a source at Rosneft said.

In its struggle against Gazprom, Rosneft in January hired TV presenter Mikhail Leontiyev - who once called Gazprom CEO Alexei Miller a "shell-shocked maniac" for downplaying the importance of U.S. shale gas - to head its public relations office.

"We believe there are some factors restricting the gas potential of Russia, which, due to increasing competition from international majors, requires that laws be modernised," Rosneft's spokesman said, without elaborating.

Gazprom declined to comment.

Rosneft has staked a lot on developing its gas business. After Sechin took the helm in May 2011, it acquired independent gas firm Itera and gained rights to develop large deposits in Russia.

It plans to more than double gas output by the end of the decade to take advantage of a gradual liberalisation of the Russian gas market.

Thanks to new acquisitions, the company has seen its gas output trebling over the past year to 42 billion cubic metres - enough to meet gas demand in a country the size of France.

CHINA

Gazprom has been in painstaking talks over the last 10 years about shipping gas to China and has been unable to agree on pricing. The company now aims to reach the agreement in May during Putin's planned visit to China.

Gazprom head Miller is also a member of Putin's inner circle.

Putin has urged domestic companies to forge close ties with energy-hungry China as Europe, Russia's Cold War-era foe, tries to diversify away from Moscow.

Sechin, unlike Gazprom, has successfully clinched deals to increase oil supplies to China, which may see Rosneft tripling its crude exports to Russia's neighbour later this decade.

The Rosneft source said the company is eying natural gas supplies to China and that around 1 trillion cubic metres of gas is available for the company in East Siberia.

A government source confirmed Rosneft has been actively lobbying for permission to export pipeline gas to China.

"They have sent different letters and appealed to the government ... I think they will make a public statement (on gas exports) soon," the source said. (Editing by Dale Hudson)

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