Russia Gazprom, UES end gas stalemate at power plant

MOSCOW, April 17 (Reuters) - Russia’s state-controlled gas and electricity giants have ended a stalemate over a lack of gas supplies which have left a $375 million power turbine idle for months, the plant’s managers said on Thursday.

Gas export monopoly Gazprom GAZP.MM agreed with former power monopoly UES EESR.MM to provide gas for the turbine unit at the North West plant near St. Petersburg in early April, they said in a statement.

It has taken 16 months to resolve the stand-off, which highlights the difficulty UES will have in providing fuel for the hundreds of turbines its subsidiaries plan to install in coming years in hopes of averting a power deficit in Russia.

The turbine was installed in December 2006.

“In early April, the volume of gas for the station was agreed upon,” the head of the North West plant, Oleg Khotchenkov, said in a statement, adding that both turbine units had on Thursday afternoon been turned on.

The turbine, meant to provide power to St. Petersburg, had previously been turned on only once, using fuel diverted from the plant’s other turbine for a ribbon-cutting ceremony attended by President Vladimir Putin.

Since then it has been gathering dust, UES has said.

UES, or Unified Energy System, is in the process of selling off all of its assets as part of a sweeping reform of the sector, which is meant to raise investment for a $130 billion overhaul of the power sector.

Much of that investment will go toward building some 35,000 megawatts of new generating capacity. But the state-of-the-art turbines will not be turned on until its owners can supply them with fuel.

For Gazprom, which produces more than 80 percent of Russia’s gas, it is not profitable to sell gas on the domestic market, where it it is sold for less than a quarter of European prices.

Only a few of the twenty major electricity producers being sold off by UES have managed to strike long-term deals for gas supplies with Gazprom, or with Russia's small independent suppliers, such as Novatek NVTK.MM.

At the same time, the power companies are proceeding with ambitions plans to build new turbines at their power stations.

And even the North West plant, managed by state-controlled electricity trader Inter RAO, has not reached a long-term deal.

“The supplies of gas will be delivered under short-term contracts,” Inter RAO said in a statement on its Web site. (Reporting by Simon Shuster)