Rosneft, Inter RAO sign 25-year gas supply contract


Rosneft, Inter RAO sign 25-year gas supply contract

Lukas I. Alpert, Dow Jones Newswires 

MOSCOW--Russian state-owned oil giant Rosneft  has signed a 25-year contract to become the new gas supplier for state holding company Inter RAO starting in 2016, the companies said Thursday.

The deal would see Rosneft supplying Inter RAO with up to 35 billion cubic meters of gas annually through the end of 2040.

"This contract is designed to guarantee stability for our company in the long term and will allow us to considerably improve the efficiency of power generation in Russia," said Inter RAO Chairman Boris Kovalchuk.

The deal, which was first reported Thursday morning by Russian business daily Kommersant, would mean Novatek (NVTK.RS), Russia's largest independent natural gas producer, will lose its key client, Inter RAO, which accounts for 30% of Novatek's sales.

The report sent Novatek's shares tumbling 7.8% to 313.7 rubles ($10.0) in Moscow by 1035 GMT. Rosneft shares rose 0.7% to 234.6 rubles.

Rosneft President Igor Sechin said the deal would go a long way to maintaining long-term profitability.

"Concluding an agreement to supply gas directly to Russia's largest generating utilities is the most effective way to monetise our reserves," he said.

While the companies didn't disclose financial terms, Kommersant estimated the contract to be worth at least 2.5 trillion rubles, according to its own calculations.

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