Alexei Miller and Dr. Jürgen Hambrecht conduct top-level discussions in Ludwigshafen Achimgaz joint venture between BASF and Gazprom prepares production phase for natural gas Gas for Europe: security of supply thanks to successful production, transport and natural gas trading WINGAS seeks stake in North European Gas Pipeline

Top-level discussions were held today (Wednesday, October 20, 2004) at BASF in Ludwigshafen between the chairman of OAO Gazprom, Alexei Miller; the chairman of BASF, Dr. Jürgen Hambrecht; and the BASF board member responsible for the oil and gas business, Dr. John Feldmann. Discussions focused on the continuation and extension of the long-standing cooperation between the two companies. Particular emphasis was placed on cooperation in natural gas trading and on the rapid progress of the Russian-German joint venture OOO Achimgaz.

The Achimgaz joint venture was founded in July 2003 between BASF subsidiary Wintershall and Urengoigazprom, a wholly owned subsidiary of Gazprom, with the aim of developing part of the Achimov deposit of the Urengoy gas, oil and condensate field in Siberia. With a total investment of $700 million, the joint venture expects to produce approximately 200 billion cubic meters of natural gas and 40 million metric tons of condensate in the coming 40 years. Wintershall AG will therefore become the first German company to produce natural gas in Russia.

Milestone in Russian-German business relations

Gazprom Chairman Alexei Miller hailed the cooperation as a milestone for the Russian gas industry. "This joint venture is a model for cooperation with foreign partners in producing natural gas in Russia," said Miller. OAO Gazprom, the world's largest producer of natural gas, has thus established its first joint venture with a German partner to produce Russian natural gas. "This project will expand our partnership and the very close and successful cooperation we have achieved for more than 14 years," explained Dr. Jürgen Hambrecht, Chairman of the Board of Executive Directors of BASF.

The joint venture OOO Achimgaz is currently concentrating on completing the technical details and the preparations for the production phase. In the next step, initial operational activities will be started in Novy Urengoy. The overall development of the field is expected to begin in 2008.


Successful, long-term model for natural gas marketing applied to Achimgaz

Via its Wintershall subsidiary, BASF Aktiengesellschaft as the largest industrial gas consumer in Germany combined its interests with those of the world's largest gas producer Gazprom as far back as 1990. This cooperation provided the Russian gas producer with direct access to Germany's natural gas market. In turn, BASF was able to strengthen its competitiveness by means of a direct gas supply and at the same time laid the foundation for a very attractive business area.

Joint ventures to trade natural gas in Germany and Europe were established in the form of WINGAS, WIEH (Wintershall Erdgas Handelshaus GmbH) and WIEE (Wintershall Erdgas Handelshaus Zug AG), and the two partners have now been cooperating successfully in the market for 14 years through these channels. "It was therefore logical to apply the successful model for natural gas marketing to the production of natural gas," said Dr. John Feldmann. "We can thus combine the strengths of the two companies, bundle their competencies and share profit and risk," he continued. The two partners each bring their own strengths, and the Achimgaz joint venture combines Gazprom's permafrost expertise with Wintershall's experience in developing deep and complex reservoirs.

Common goal: Gas for Europe

The Achimgaz joint venture will make an important contribution toward ensuring secure supplies of natural gas to Germany and Europe. In the future, successful European activities are to be further expanded through closer cooperation with Gazprom's subsidiary OOO Gazexport. Russian natural gas will become increasingly important for Central and Western Europe in view of the decline in volumes produced in the North Sea and the constant increase in demand. Against this background, the chairmen of both companies have agreed to review the possibility of WINGAS acquiring a stake in the North European Gas Pipeline (NEGP). WINGAS is already a member of the working party that is reviewing the feasibility of this Baltic pipeline.

"The two successful fields of exploration and production and natural gas trading complement one another ideally in our Gas for Europe concept," said Hambrecht. The idea is to find new gas in and around Europe, to produce it and shape the infrastructure such that the gas can be provided to European customers.

WINGAS on a growth path in Europe

The creation of the WINGAS joint venture in the early 1990s was followed by one of the largest investments by a Russian company in Germany to date. About €3 billion has been invested in expanding WINGAS' natural gas trading business. Today, the German-Russian company has a modern infrastructure with a network of more than 2,000 kilometers of pipeline in Germany that connects the huge gas reserves in Siberia with the growing markets in Western Europe. WINGAS also owns Western Europe's largest gas storage facility in Rehden, Germany, and supplies regional gas transmission companies as well as power plants and larger industrial customers, including BASF's main site in Ludwigshafen.


WINGAS has used the opportunities arising from the liberalization of the European natural gas market as the basis for further growth: The company has now secured a market share of more than 7 percent in Belgium. It has also stepped up its natural gas marketing activities in the United Kingdom by establishing the new joint venture HydroWingas with the Norwegian company Norsk Hydro. WINGAS has now also started supplying initial customers in France and Austria.

Note:

You can download a photo of the discussions in Ludwigshafen from BASF's homepage at www.basf.de/pressphotos, keyword "Oil & Gas," search term "Discussions with Gazprom."

BASF is the world's leading chemical company. Our goal is to grow profitably and further increase the value of our company. We help our customers to be more successful through intelligent system solutions and high-quality products. BASF's portfolio ranges from chemicals, plastics, performance products, agricultural products and fine chemicals to crude oil and natural gas. Through new technologies we can tap into additional market opportunities. We conduct our business in accordance with the principles of sustainable development. In 2003, BASF had sales of more than €33 billion (circa $42 billion). BASF shares are traded on the stock exchanges in Frankfurt (BAS), London (BFA), New York (BF), Paris (BA) and Zurich (AN). Further information on BASF is available on the Internet at www.basf.com.