21 January 2003 07:29
Gazprom dispute may hit Northgas production
Northgas, one of Russia's few independent gas producers, says it may be forced to halt production today due to
what it says is an effort by Gazprom to expropriate its $85m investment in a new gas field.
Northgas, which operates the North-Urengoy field in north-central Russia, says it was informed by Gazprom in writing
that access to a crucial pipeline would be denied from today due to unspecified "violations of technical
conditions".
The warning is the latest twist in a long-running dispute in which Gazprom is fighting in Russian courts to regain a
51 per cent stake in Northgas that it owned through a subsidiary until 2001. Northgas says a victory for Gazprom could
open the door for disgruntled shareholders to challenge thousands of similar share issues made by Russian companies in
1998-2000. Gazprom is arguing that a July 2000 Supreme Court decision, which threw out certain procedural rules for
share issues made by the Federal Securities Commission in 1998, should be applied retroactively.
Gazprom, which could not be reached for comment yesterday, argues that it is trying to recover its rightful stake in
Northgas by reversing an unfair share dilution. Northgas, however, says the large investments made by its private
shareholders make its dispute with Gazprom different from other cases in which the national gas company's new
management has tried to regain assets that were transferred cheaply to other companies by past Gazprom managers.
Northgas says Gazprom's only contribution was the licence to exploit the North-Urengoy field and other
permissions, which the founding shareholders agreed to value at $2.5m when Northgas was created in 1993. The other main
founder, Bechtel of the US, sold to local investors in 1996.
Northgas says the development didn't really get moving until a second share issue launched in 1999 gave private
shareholders 99.5 per cent of the company and diluted the Gazprom subsidiary's stake to 0.5 per cent.
During that issue, private shareholders sued, claiming two wells contributed as payment for Gazprom's shares
were worthless. The shares were returned and sold to other investors.
However, last November Gazprom won a ruling in a regional court cancelling the second share issue on the grounds that
it had been approved by a meeting of shareholders, as the securities commission ordered, rather than by the board of
directors, as the Supreme Court said was necessary in its 2000 ruling. The Supreme Arbitration Court has agreed to hear
Northgas's appeal.
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