3 Mar 2010 13:58

Gazprom eyes shedding middlemen in exports

MOSCOW. March 3 (Interfax) - With a focus on reforming gas exports and turning its foreign-business profit center into a global company, Gazprom plans to do away with unnecessary intermediaries in its export chain to Europe.

The management of Gazprom's export block raised substantive criticisms at an executive meeting back in November 2008; some Gazprom subdivisions were being asked to help "everyone else."

Several Gazprom sources who spoke with Interfax that the company's finances and economy department had drawn up a "plan of measures for streamlining the management of foreign business."

This calls for "preparing the groundwork for existing gas-sales layouts with the goal of deciding the value in using intermediary companies." A review of the validity of middleman margins and the improvement of the company's system for profit-repatriation are planned.

The matter of identifying intermediaries to be cut out is not simple, as they often are not merely pure gas-resellers, but are involved in increasing gas usage in sales markets. "Even E.ON Ruhrgas could be called a middleman," joked one of Interfax's sources. Another said that it had been decided for now that such middlemen will be understood to be those that buy and resell gas at one and the same point.

Some top Gazprom managers think the "situation developing in Gazprom's traditional foreign sales markets calls for stepping up the optimizing of marketing expenses," one source said.

"The product sales system now consists of a multilevel structure of subsidiaries and their subsidiaries in organizations whose activities are not always transparent, and mechanisms for control over their formation and use of accrued assets are not always effective," is a management viewpoint described by one source.

Among the proposals for overhauling Gazprom's export block is the revolutionary idea of creating a new department within Gazprom for foreign market trade on the basis of the existing department for foreign economic activity and LLC Gazprom Export.

Intermediaries - joint trade enterprises involving Gazprom and local market operators - are found in the sales chain all over Europe: Wingas (Germany and other countries), GWH (Austria), Promgas (Italy), Prometheus Gas (Greece), Panrusgas (Hungary), Overgas Inc. (Bulgaria), Yugorosgas (Serbia), and Gasum (Finland).

Gazprom's export block underwent significant corporate optimization last year, during which the structure of the Gazprom Germania group was streamlined to a significant degree.