Friday, Nov 07, 2003
Igor Makarov gestures towards a large map of the former Soviet Union showing his company's widely spread activities and then turns off the spotlight as he bounds back to the desk on the far side of his large office. "We should save energy," he says.
It might seem a strange comment for the chief executive and largest shareholder of Itera, a company that in the past decade became one of the world's most significant independent gas operators. But that situation could be about to change.
Mr Makarov, a former cycling champion, built Itera by trading on his tight links with the gas-rich central Asian republic of Turkmenistan. He used his contacts, energy and a particular skill in barter trades in the difficult post-Communist business environment.
His company could soon be subsumed into the sprawling empire from which it benefited in the past: that of Gazprom, the Russian state-backed group with headquarters just a short drive away from Itera's pink-lined tower in Moscow's south-eastern "gas district".
Three years ago, Mr Makarov was at the centre of unwelcome attention as Gazprom shareholders and independent board directors argued that Itera had acquired assets cheaply through dilutive share issues. They raised questions about the terms on which it - one of the few private operators - was allowed to transport gas through Gazprom's pipelines.
In spite of objections about its independence, it was PwC, Gazprom's auditors, which conducted a study and found nothing untoward. Mr Makarov maintains the allegations were untrue and that "Gazprom was never damaged and always made good profits on its business with Itera, of up to 60 per cent".
But Russian government policy has taken a different turn since. President Vladimir Putin replaced Rem Vyakhirev, the former chief executive of Gazprom, with Alexei Miller, a long-standing aide. He brought Gazprom much more firmly under state control and its new management began systematically to take back contracts and assets from Itera.
Ukraine announced it would bypass Itera in purchases of Turkmen gas, the largest of several such decisions that cut Itera's total gas sales and profit by half.
That highlights a problem with the Russian government's strategy. For all the allegations against it, Itera did at least provide some competition in the domestic gas market and was effective at debt collection from some of the country's financially strapped neighbours. Gazprom has proved slow to restructure, invest efficiently and raise production.
Some of the contracts it has taken over from Itera - such as supplies to Tbilisi - are the most difficult on which to receive payment. By contrast "volumes have fallen but the quality of our business has gone up", says Mr Makarov. "Gazprom will need 2-3 years to gain Itera's experience."
Mr Makarov plays down the suggestion of a Gazprom buy-out, making the case instead for a listing in London within three years once it sheds non-core assets - or possibly finding a strategic western energy partner.
He will not comment on suggestions that Gazprom should be broken up but he calls for easier access by independent producers to its monopoly pipeline network time and has at least one demand in common. Without a rise in subsidised domestic gas prices towards market levels, he warns future gas investment will prove extremely difficult.
By ANDREW JACK
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