* BASF may look to sell German gas pipelines
* Expected to focus even more on exploration
* Infrastructure groups seen interested in gas grids
By Frank Siebelt and Vera Eckert and Arno Schuetze
FRANKFURT, Dec 13 As Germany's BASF SE
switches focus to the control of natural gas
resources, it could have at least one major cash-raising
disposal in its sights: its majority stake in gas pipeline grid
Selling its 50.1 percent stake in a business which
transports gas over some 2,200 kilometres of pipeline, mainly
from eastern German to the west of the country, could raise some
2.2 billion euros ($2.9 billion) for BASF to invest in buying
more gas reserves, some analysts say.
Such a strategy of controlling key resources is seen by the
chemicals company as increasingly important in supplying the raw
material for it to convert into basic chemicals products and
"Most likely, exploration is looking lucrative and of
long-term promise from their point of view, so worth investing
in," said Thorsten Strauss, analyst at NordLB bank.
A spokeswoman for BASF would not comment on speculation
about asset sales. But some banking sources believe discussions
on the asset could start early next year.
"In my opinion, this deal is red hot," one source said.
Gascade, which BASF built after German reunification to
avoid dependence on the incumbent at the time, E.ON Ruhrgas
, could have strategic value to a buyer because it
could become the focal point in a wider European gas network of
But for BASF it may no longer fit its long-term plans.
The German group has already shuffled its assets in this
sector and last month agreed an asset swap with Russia's Gazprom
, owner of the rest of Gascade.
In that deal, BASF handed over gas trading and storage
business activities, which it had shared with Gazprom, to its
partner, in exchange for two more blocks in the Siberian Urengoi
It held on to its stake in Gascade, but having given up gas
trading and storage, BASF may see little strategic value in
owning the transport network.
One important factor allowing it to consider the sale of
Gascade is that EU regulations demand pipeline owners give gas
suppliers equal access to pipelines, which means BASF does not
have to own the network to transport gas.
Other political issues could also come into play.
"Selling Gascade could have the additional advantage of
avoiding having to deal with possible regulatory and political
uncertainties in the European gas market in the next few years,"
said NordLB's Strauss.
MURKY AND COSTLY
He pointed out that gas pipeline issues have become
politicised as projects such as Nord Stream and South Stream
play a big role in Gazprom's geopolitical strategies.
The EU, wary of becoming too dependent on raw materials from
Russia, will be monitoring closely the transparency and access
debates affecting intra-EU pipelines.
This likelihood could make engagements in the sector
time-consuming, murky and costly.
Some sources put Gascade's potential value at around 2.2
billion euros, if applying a rule of thumb that one km is worth
1 million euros.
Granted, this value may no longer apply in recessionary
times, but Gascade's pipes are relatively modern and some argue
should be valued above typical prices.
Sources said BASF might target companies such as Australian
investment bank Macquarie, private equity firm Global
Infrastructure Partners (GIP) and insurers such as Allianz
or Munich Re.
For BASF, a possible sale of Gascade isn't just a matter of
its own long-term strategy.
Transport margins have been falling in the German pipeline
sector, curbing revenue in recent years, after the energy
regulator put pressure on operators in order to stimulate
competition and help bring down prices for consumers.
Such trends might also prompt Gazprom to seek to surrender
its Gascade holding, the sources said.
Nevertheless, some analysts say gas pipelines have long-term
promise and represent a stable investment opportunity, if
investors look beyond the medium-term market lull.
"I would imagine that they would not like to surrender the
pipeline grid altogether and would instead aim to keep some
control there," said Lars Hettche, analyst at Metzler Equities.
But Hettche conceded BASF might see the long-term prospect
of global oil and gas scarcity as an overriding factor.
In which case, he said, "they would consider that the
exploration partnership with the Russians in Siberia has proven
to be reliable and lucrative and may be worth intensifying".