Gazprom and Naftogaz Back on Track

Gazprom and Naftogaz Ukrainy, the Ukraine state-run energy company, agreed Friday that they could move toward a complete merger after they create a joint venture.

This follows a meeting between Alexey Miller, Chairman of Gazprom’s Management Committee and Yury Boiko, the Ukrainian Fuel and Energy Minister.

Naftogaz is Gazprom’s second-largest foreign customer after Germany.

Gazprom’s statement suggested that a 50-50 venture could be a “first step” in the eventual unification of the companies. “The parties agreed that the process could be gradual.”

At the conclusion of the meeting, Mr. Miller noted, “At the first stage a joint venture (JV) may be set up on a parity basis between the companies – 50 by 50 per cent. At the moment, it is necessary to outline the list of assets that can be contributed to the JV by each party.”

A merger of the companies was proposed by Prime Minister Vladimir Putin on April 30, 2010.  The proposal was not initially received well by the Ukraine, as Naftogaz is just 6 percent the size of Gazprom in terms of sales last year. Ukrainian President Viktor Yanukovych later said a merger would have to be on parity terms.

Commenting separately on Friday, Russian Energy Minister Sergei Shmatko told reporters that Russia hoped the companies would do their best to complete the talks on possible scenarios for the merger “as soon as possible.”

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