Gazprom set for rare victory in European expansion

By Peter Dinkloh

FRANKFURT (Reuters) - Russia's Gazprom GAZP.MM, the world's largest gas company, is set for a rare victory in the quest to expand its foothold in western Europe.

Shareholders in eastern German gas supplier VNG, which has been importing Russian gas for more than 40 years, are set to agree to GDF Suez selling its 5 percent VNG stake to Gazprom and have indicated they would allow the Russian company to buy more shares.

For years, Gazprom has been keen to sell more gas directly to lucrative western European customers but has had difficulty with expansion.

It was eyeing British utility Centrica (CNA.L: Cotización) in 2006 but the interest was met with the threat of "robust scrutiny" from the British government and stopped right there.

In 2003, Gazprom considered making a bid for E.ON, the world's largest utility, according to a person at E.ON who declined to be identified.

Two VNG shareholders -- 48 percent stakeholder EWE and 26 percent shareholder VUB -- told Reuters they would not oppose Gazprom expanding its VNG stake, which is a much more welcoming stance than the utility has encountered in the past.

BASF's BASF.DE Wintershall unit, which holds 16 percent of VNG -- Germany's third-largest gas importer -- said it was "sympathetic" toward Gazprom expanding its stake. VNG is eastern Germany's largest gas importer and generated net income of 140 million euros ($209 million) in 2008 on sales of 5.5 billion euros.

Gazprom buying GDF Suez's VNG stake "would be a logical deal," said a manager at one of the shareholders, who declined to be identified. The stake is worth between 150 million euros and 200 million euros, according to a person in the finance industry.