Nord Stream natural gas pipeline

GDF Suez is hoping to wrap up talks to join the Nord Stream natural gas pipeline by the year-end and sees no obstacles to completing the transaction on time, a senior executive said yesterday. GDF would acquire its stake in the pipeline project from the German firms in the venture, allowing Russian gas giant Gazprom to maintain its 51% shareholding, GDF's Vice Chairman Jean-Francois Cirelli told reporters at the World Gas Conference.

"At this time there are no big questions or obstacles to completing the deal by year end," Cirelli said.

Sources familiar with the discussions had suggested earlier this month that GDF was negotiating to take a 9 percent stake in the pipeline project.

German utility E.ON Ruhrgas is the other main backer of the pipeline, which connects Russian gas fields with Western European markets by following a route in the Baltic Sea.

Nord Stream will carry 55 million cubic meters of gas annually to Germany when it begins operations in 2012. The line has proven controversial as Germany's neighbours have worried it could give Russia more leverage over energy supplies into Eastern and Central Europe.

Cirelli warned that gas producers will have to be more accommodating with pricing if the present divergence between oil-linked long-term contract prices and the spot market persists. "We want cooperation with producer countries because if they don't want a modification (of pricing policies) ... then we may be faced with a question of volumes."

European gas sales have been slammed by the global economic slowdown. E.ON Ruhrgas, one of Europe's leading gas distributor said it expected sales volumes of the fuel to decline 7 percent this year.

Algerian Oil Minister Chakib Khelil has told reporters the North African nation had sold 10% less gas than in 2008 and had deliberately curtailed liquefied natural gas production to reduce the amount of gas headed to market.

"There is a disconnect between the price of oil and the price of gas. In our view this disconnect could continue at least through the end of 2010 and maybe longer," Cirelli said.

Cirelli added that the weak spot gas price was already depressing investment in new production capacity despite the long-term need for heavy capital spending over the next decade to support anticipated growth in global gas demand.