MOSCOW (Reuters) - Russian state oil company Rosneft (ROSN.MM) signed an $80 billion deal to supply state power company Inter RAO (IRAO.MM) with natural gas, a source said, replacing Novatek (NVTK.MM) as Inter RAO’s main supplier.
Novatek shares fell 6.9 percent, underperforming a 1 percent decline of the broader Moscow stock market .MCX.MM, while Rosneft shares were down 0.3 percent.
The contract will run for 25 years from 2016, the source close to Rosneft said on Thursday. Inter RAO was not immediately available for comment. Rosneft and Novatek declined comment.
Novatek, which is barred from selling Russian gas abroad by law, had won its contract to supply Inter RAO with gas in 2009, outmaneuvering gas export monopoly Gazprom (GAZP.MM).
The Inter RAO contract accounted for close to 28 percent of Novatek’s volumes sold in 2011 and was deemed a big win for the company when it won the contract from Gazprom, analysts at Bank of America said in a research note.
The deal may indicate friction between Rosneft CEO Igor Sechin and Novatek co-owner Gennady Timchenko, after Rosneft did not invite Gunvor - where Timchenko is also a co-owner - to participate in its semi-annual “jumbo” oil tender.
The two have denied there is friction.
It is also an example of Rosneft’s new influence in the gas market. The group has started moving into Russia’s gas producing market and created a joint venture with medium-sized gas producer Itera earlier this year.
“The news underscores the danger of Rosneft’s foray into the gas market,” Bank of America analysts said. “Rosneft’s new volumes are an addition to an already oversupplied gas market in Russia.”
Rosneft, which accounts for almost a quarter of Russia’s crude production, has long been eyeing expansion into the gas market, dominated by Gazprom.
In 2011 Rosneft, set to become the world’s largest oil producer after the $55 billion acquisition of Russia’s third-largest oil company TNK-BP TNBP.MM, produced almost 12 billion cubic meters of gas (bcm), or less than 2 percent of Russia’s total.
Rosneft CEO Igor Sechin said on Wednesday Rosneft and its state holding company were still looking at buying a stake in Inter RAO as one option of consolidating Russia’s energy assets.
Additional reporting by Nastya Lyrchikova; Writing by Megan Davies; Editing by Jason Bush