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OMV, Gazprom to have 50-50 in Baumgarten natural gas trading hub

November 16, 2007
Source: Platts

Austria's OMV and Russian gas giant Gazprom will each take 50% in the Central European Gas Hub GmbH (CEGH), the trading platform for OMV's Baumgarten gas hub, under a deal expected to be finalized "within weeks", managing director Harald Wustrich told Platts late Thursday on the sidelines of a gas transmission conference in Bratislava, Slovakia.

"It can only work on a parity basis," Wustrich said. He noted that "Gazprom has the gas" while OMV has the physical hub and infrastructure for delivery of the gas to customers. Markets served with gas physically delivered from Baumgarten include Italy, Austria, Germany, Switzerland, Hungary, Slovenia and Croatia.

CEGH is working with OMV and Gazprom on the development of trading and financial products that will make Baumgarten the "biggest gas hub in continental Europe", outstripping Zeebrugge, Wustrich said. Over 30 billion cubic meters per year is currently transited through Baumgarten, in addition to over 6 Bcm/yr shipped for Austrian consumption, Wustrich told the conference.

Transit could approach 50 Bcm/yr by 2011. Trading at Baumgarten started two years ago and has now reached 1.8 Bcm/month, Wustrich said. There are over 40 customers actively trading at the hub, and close to 60 registered customers. The main title transfer point is Baumgarten, but there are additional points at the German border and in southeastern Austria, near the Slovenian border.

CEGH, together with European traders' organization Efet, is also working on the development of a gas exchange, which represents the "next step" in the development of Baumgarten as a major financial and trading center, in addition to its role as a physical hub, according to Wustrich.

"We have now established the conditions for financial trading," he said, going beyond the auction-based OTC trading now common at the hub. One of the main elements in the transformation will be the development of a central counter-party assuming the risk of transactions. Currently, the parties to OTC transactions carry the risks themselves. "We are developing this system together with Gazprom," Wustrich said.

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