MOSCOW — A memorandum of understanding between Gazprom and BASF stipulates the exchange of shares, Russian President Vladimir Putin has announced at the ceremony of signing bilateral agreements between Russian and German companies at the Hanover Fair. Putin considers the signing of this memorandum to be an outstanding event marking a new stage of cooperation. It is the first time that a foreign partner has been allowed to participate in gas production in Russia and it is to pay in shares for this participation, not money, Putin emphasized. Gazprom is to acquire 49 percent of shares in German's transportation system and will be allowed to take part in the distribution of gas. The two parties are also to cooperate in gas production in other countries. This will enable the two partners to contribute to the worldwide gas production situation, Putin believes.

Gazprom and BASF have agreed on cooperation in the development of the Southern Russian gas field, Gazprom CEO Alexey Millar has announced at a press conference today. According to Miller, Wintershall, BASF's subsidiary, will have 50-percent minus one share in the project. It is to pay in shares for this participation. Gazprom's stake in another BASF subsidiary, Wingas, will be increased to 50 percent minus one share from the current 35 percent. Currently, Wingas operates 2,000 kilometer long pipelines in Germany and controls over 3bn cubic meters of stored gas. According to Miller, Wingas will acquire gas transported via the North European Gas Pipeline, Miller stressed.

Reserves of the Southern Russian gas field exceed 500bn cubic meters, five-year Germany's need for gas, BASF CEO Jurgen Hambrecht stressed.

Gazprom has already started developing the Southern Russian gas field, the main source for gas supplies via the North European Gas Pipeline. The construction of the pipeline will start in 2005 and be finished in 2010. Its capacity will reach 19.7bn cubic meters of gas.