OAO Gazprom and E.ON AG yesterday inked a framework deal to swap upstream, downstream and power generation assets.

Gazprom and E.ON agreed to swap a 25 per cent minus 1 share participation interest in the Yuzhno-Russkoye gas condensate field for a package of equity in E.ON, which includes shareholdings in the Hungarian E.ON F?ldgaz Storage and E.ON F?ldgaz Trade gas companies (a 50 per cent stake minus 1 share each), as well as for a 25 per cent stake plus 1 share in the regional E.ON Hungaria electricity and gas company. Moreover, Gazprom will receive an extra recompense.

At the same time, E.ON and Gazprom agreed to jointly implement electricity generation projects at European power plants.

E.ON and Gazprom are resolute to strike elaborate asset swap deals by the year-end. Projected acquisition of assets in Hungary must be endorsed by the European Commission and Hungarian authorities.

The signed framework deal is a further step to deeper cooperation between Gazprom and foreign companies in the upstream sector through the equivalently valuable and strategically attractive swap of assets. The stake in the Yuzhno-Russkoye gas field will expand and deepen the long-lasting partnership ties between Gazprom and E.ON. Given the increasing demand for natural gas, the companies are making a significant contribution in reinforcing the European energy supply security in a long run.

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Founded in June 2000 through the merger of VEBA and VIAG, the German E.ON AG company is the world’s largest privately-held power & gas Concern with over EUR 56 bln in annual turnover and about 80,000 people employed.

E.ON Ruhrgas AG (Ruhrgas AG, before July 1, 2004) has been part of E.ON AG since February 2003, overseeing the Group’s gas business in Europe, including natural gas production, marketing, transmission and storage.

The company possesses a manifold 11,273-km-long gas transmission network comprising 12 underground storage facilities with 5.1 bcm in overall working gas volume. In terms of natural gas marketing (690.2 bln kW/h), E.ON Ruhrgas is a leader in Germany and is among the top three firms in Europe.

Owning a 6.5% stake in Gazprom, E.ON Ruhrgas is its largest foreign shareholder.

Over a range of years, Gazprom and E.ON Ruhrgas have been successfully cooperating in the gas pipeline anticorrosion protection, gas-pumping unit operation optimization, gas dispatching and other joint businesses.

In 2000 (Berlin) and 2002 (Moscow), Gazprom and Ruhrgas signed the Memoranda of understanding.

On July 8, 2004, Gazprom and E.ON sealed the Memorandum of understanding that fixed accords to further deepen successful cooperation when implementing both companies’ strategic projects. In addition to the traditional gas supply business, the parties started implementing joint gas extraction, transmission & marketing and power generation projects.

Gazprom has so far launched production at the Yuzhno-Russkoye field representing the major resource base for gas shipments by the North European Gas Pipeline. Seismic survey and drilling operations are currently underway at the field that has over 700 bcm of the proven gas reserves. Projected production after full ramp-up – some 25 bcm of gas per year. Production launch – 4th quarter of 2007.