Gazprom admits to PR challenges in taking 10% of UK gas market

By bne IntelliNews June 4, 2007

Tim Gosling in Moscow -

Gazprom is seeking to gain control of 10% of the UK gas market, but Vitaly Vasiliev, chief executive of Gazprom Marketing and Trading (GMT), admitted in an interview that the Russian company has a lot of work to do PR-wise.

Gazprom directly supplies close to 4% of gas arriving in the UK, up from 2% at the start of last year, with GMT importing a further 4% of the country's gas, mostly from Norway. Vasiliev said in an interview with the Daily Telegraph last week that he expects supplies heading directly from Russia to the UK to rise above 10% by 2012 at the latest, with gas sourced from other countries to also rise sharply.

As part of the plan, the Russian company is considering teaming up with others to get involved in the construction of power stations in the country. Gazprom has signed such deals in mainland Europe. "I am not excluding this type of project in the UK with a partner. But we do not have a detailed project now which I can announce."

He added that despite last year's rumours that it was interested in buying power utility Centrica, the company has no designs to gain direct access to private UK gas consumers.

Those rumours provoked quite a storm at the time, and the CEO admitted that the company has a lot of work to do PR-wise in the UK. Today, GMT supplies 2,000 small businesses in the UK, as well as national institutions such as Headingley cricket ground in Leeds and York Minster.

However, last month's embarrassment over its bid for supply contracts to the National Health Service reminded the Russian giant that it remains the subject of deep mistrust in the country. The deal was said to have "potentially horrendous" implications due to Gazprom's unreliability as a supplier, and even the untrustworthiness of President Vladimir Putin.

"I understand certain sensitivities of supplying gas to the NHS. But I was surprised by certain interpretations that Mr Putin can take the decision to supply the NHS, or not to supply it; or take a decision to switch off gas supplies," Vasiliev complained to the paper. "The UK market does not work like that. We as a commercial organisation bid for contracts against competition from many other sources. If, for some reason, supplies were stopped, gas would be supplied by the wholesale market and we would have a lot of [financial] penalties."

Asked for his opinion on the strained relationship between Russia and the UK – including the current sniping over the case of the poisoned former Russian spy Alexander Litvinenko - Vasiliev was understandably unwilling to stray into the topics. "There are certain issues between Britain, the European Union and President Putin. But my job is not to be a politician and solve problems on that level. My job is to be a businessman. You are mixing politics with business. What I am trying to do is separate them."

That may be hard for some to swallow, however, given that a key feature of Putin's administration has been the blurring of the line between the two, and Gazprom's starring role in this.

Gazprom knows it has an image problem, however. Last week, the Daily Telegraph uncovered Gazprom documents admitting that it must overcome hostility by politicians and the media if it is to grow a successful business in the West.

GMT 2006 financials

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