Eurochem to produce gas

The Russian chemicals enterprises are getting more and more interested in gas production – their main raw materials. Eurochem within a month might agree on the purchase of new gas assets in the district of Novy Urengoi and in the South of Russia. The company is going to not only load its plants but also sell gas. A competitor of Eurochem – the holding Akron – wants to purchase gas deposits. Eurochem might be interested in the gas assets of Alrosa for $1 bln, analysts think. Yesterday the main owner of Eurochem, A. Melnichenko said that the company within a month might report on the agreement on the gas assets. Mr. Melnichenko said that Eurochem is interested in the deposits in the area of Novy Urengoi and in the Southern part of Russia. It was decided to invest into the new assets only 2 weeks ago. In particular, at the end of September the company approved the strategy of the development of the gas business for 2012-2016. According to the entrepreneur, Eurochem didn’t study certain variants of purchasing the assets in the gas sector. But now, he said, Eurochem is ready to spend “a significant amount” on that. Mr. Melnichenko didn’t mention the parameters of the deposits he aims at, but said that “we should produce for ourselves and for sale in the market”. Eurochem consumes about 4.5 bln cubic meters of gas a year. V. Kryukov from IFD Capital says that there are a few possible assets in the regions mentioned by A. Mellnichenko that Eurochem could afford and that would suit him by their reserves, for example, the company Volga Gas that has a deposit in the Volgograd and Saratov regions and also the Caspian region. The volume of perspective reserves is estimated at 35-49 bln cubic meters. The company’s shares are listed on the LSE. Mr. Kryukov assesses it at $150-200 mln with a premium. The second possible variant is the gas assets of Alrosa in the area of Novy Urengoi. However, their cost is much higher – about $1 bln for almost 200 bln cubic meters of reserves. Eurochem is the largest producer of fertilizers in Russia. The structure of the group comprises the Russian companies “Nevinnomyssky azote”, novomskovsky “Azote”, “Fosforit”, “Belorechensk mineral fertilizers” and Kovdorsky GOK and also the Lithuanian plant of phosphoric fertilizers Lifosa. In 2010 it realized 8.1 mln tons of fertilizers. Now the company completes the purchase of the profile assets of BASF in Belgium and France. Eurochem already has licenses for the development of oil and gas sites. In 2010 the company purchased at the auction a hydrocarbons site Yuzhny in Adygea with the forecast D1 resources at the volume of 3.5 mln tons of oil, 26.8 bln cubic meters of gas and 0.6 mln tons of condensate and also the Perelyubsko-Rubezhinsky site in the Saratov region. Its perspective C3 resources make up 1 mln tons of oil, 8.7 bln cubic meters of gas and 3 mln tons of condensate. A competitor of Eurochem – Akron – is also going to purchase gas assets. In early-March it asked the Government to help it purchase gas assets or find a partner in the sphere. The purchase of a stake in a working gas company, for example one of the affiliates of Rosneft, was considered as a variant. But the plans haven’t been realized as yet. M. Alexeenkova from Gazprombank is sure that Eurochem will purchase not licenses for deposits but the ready gas assets where production is held and the economics which are clear. The analyst says that Eurochem will hardly manage to buy the deposits near its plants. So Eurochem wants to agree with Gazprom on swap operations, and if it manages this , it will be a precedent for the chemicals sphere. Translated by Galiya Musabekova

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