German energy giant, Wintershall
intends to deepen ties with Russia
Wintershall to invest €3.5 billion in ventures with Gazprom

By Judy Dempsey
United Press International

BERLIN — Defending Russia as a reliable and essential energy partner for Europe, the German energy company Wintershall said Friday that it would invest more than €3.5 billion over the next three years, most of it earmarked for its joint venture deals with Gazprom, the state-owned Russian gas giant.

Reinier Zwitserloot, chairman of Wintershall — the energy division of the chemical company BASF — said €1.9 billion, or $2.5 billion, would be invested in Nord Stream Baltic, where it is involved in a joint venture with Gazprom and another German company, E.ON Ruhrgas.

This project, which involves building a pipeline under the Baltic Sea, would allow Russia to send some of its natural gas exports directly to Germany, bypassing transit routes through Ukraine and Poland.

Zwitserloot also said more than €800 million would be invested in the Achimgaz company and the Yuzhno Russkoye fields, where Wintershall and Gazprom have created joint ventures for natural gas exploration and production in western Siberia.

A further €800 million would be spent on projects in North Africa, particularly Libya, which would be independent of Gazprom.

The high level of investments was announced as Wintershall reported an increase in sales and profit for 2006. Natural gas sales rose to €10.6 billion from €7.6 billion in 2005. Profit from operating activities increased to €3.25 billion from €2.41 billion.

Wintershall, which entered the German natural gas market in the early 1990s to break the monopoly held by Ruhrgas, buys most of its supply from Russia.

Despite concerns that President Vladimir Putin of Russia has used energy as a political instrument against some of its neighbors, Zwitserloot strongly defended Gazprom, calling it a reliable partner that Europe needed.

"There can be no supply without Russia," he said.

"Of course, one can criticize Russia. But we should not measure it with a different yardstick than we use for other suppliers. One thing is clear. Those who fear energy dependency on Russia should not look to Iran of all places."

Europe buys a quarter of its natural gas from Russia. Germany buys more than 35 percent from Russia.

Zwitserloot said the dependency was not one-way.

"Russia also delivers more than 60 percent of its exported natural gas in one direction. And in Europe, Germany is Russia's most important trading partner. Unfortunately, this is all too often forgotten," he said.

Zwitserloot, however, did criticize the European Commission efforts to break apart some energy companies, specifically power generators that also own distribution networks. He accused the commission of aiming to combine the grids of all the operators and place them under what he claimed would be a new cartel.

Such a move, he said, would undermine investors because the property rights would not be clear.

Indeed, he even suggested that property might be expropriated.

A spokesman for Neelie Kroes, the EU competition commissioner, said such claims were unfounded.

"The commission is convinced that ownership unbundling, that is the physical separation from commercial production and the distribution of energy from the physical infrastructure, is the only way to ensure a truly competitive market," said Jonathan Todd. "It would also ensure significant levels of investment."

When asked if he had any concerns about the Russian authorities' own record of property rights when it recently reduced the stakes held by foreign companies, including Shell, in companies in Russia, Zwitserloot said that Wintershall always had an excellent relationship with Russia.