Novatek May Break Gazprom Monopoly on Russian Gas Exports MOSCOW - Gazprom, which has long held a government-granted monopoly on Russia's natural gas exports to Europe, might finally get some competition. Shares of Russia's second-largest natural gas company, Novatek, have risen nearly 8 percent in the last few trading days on reports late last week that the Kremlin appeared to be loosening Gazprom's grip on exports, a shift in energy policy that once seemed inconceivable. Novatek is said to have reached an agreement with Energie Baden-Württemberg, or EnBW, the third-largest electric utility in Germany, for the delivery of about 2 billion cubic meters of natural gas annually. Gazprom may have retained a role as a middleman in shipping the fuel, Russia's Kommersant newspaper reported. A research note from Bank of America Merrill Lynch in Moscow recommended investors buy shares of Novatek on indications that Gazprom's monopoly had been breached. It concluded, "We believe that the risk and reward profile is becoming compelling, and we are upgrading Novatek." Gazprom, Novatek and EnBW all declined to comment on the reported agreement. Gazprom, Russia's largest company, is so closely entwined with the Kremlin that the interests of the corporation and the country are often conflated in official statements. Why the government would allow another company to export to Europe, a major market for Russian energy, remained unclear. Energy analysts said it was either an acknowledgment that Gazprom had failed to adjust to changes in the global gas industry or a sign of the ascendancy of a competing power base in Russian energy politics. Novatek is partly owned by Gennady N. Timchenko, one of a coterie of longtime acquaintances of President Vladimir V. Putin who have made fortunes in business during Mr. Putin's tenure in the Kremlin. Mr. Timchenko, once a little-known sales manager of a local oil refinery, also co-owns a commodity trading company that moves billions of dollars in oil, including for the Russian state oil company Rosneft. Mr. Putin and Mr. Timchenko have denied that their relationship played any role in the success of Mr. Timchenko's businesses, and Mr. Timchenko partly won a lawsuit in which he insisted he was not a "friend" of Mr. Putin, but an acquaintance. A spokesman for Mr. Timchenko, Anton Kurevin, denied that Mr. Timchenko had lobbied the government for concessions for Novatek, and attributed the company's success to its "outstanding management skill and high level of corporate governance." The French oil giant Total owns 15 percent of Novatek, and Gazprom owns 10 percent. Novatek has been gaining market share in Russia at the expense of Gazprom, reaching a deal to sell gas to the Magnitogorsk steel mill and the regional government of Chelyabinsk, for example. However, Novatek had been excluded from the vastly more lucrative export market, where Gazprom has had a legal monopoly since 2006. Novatek had already skirted this law for its exports from a liquefied natural gas project on the Yamal Peninsula, in the Russian Arctic, by agreeing to sell the gas through Gazprom's export subsidiary, rather than directly to international markets. But that project is years from completion. The deal with EnBW would open the spigot sooner. In a news release last Thursday that did not disclose the seller, EnBW said the first deliveries were scheduled for October. The utility said it would spend about 600 billion euros over 10 years to buy gas under the new contract. Dirk Ommeln, a spokesman for the utility, said in an e-mail that the seller had asked not to be identified. Stock traders, though, quickly decided it was Novatek, and shares in the Russian company rose sharply after the statement went out. Kommersant, a Russian business newspaper, reported that Novatek had struck a deal with the export arm of Gazprom to act as an intermediary, complying with the law and giving Novatek access to Gazprom's pipeline network. The rationale for Gazprom's legal monopoly on exports was to prevent competition among Russian companies that would push down the price of natural gas in Europe. But those prices have been tumbling anyway because of an abundance of liquefied natural gas and the weak economy. Russia supplied 26 percent of Europe's natural gas in 2011. Allowing a second seller into the market might help the Russian industry retain market share, but it could also have long-range consequences for the country's economy. Gazprom has used its immense, legally protected profits from European sales to finance drilling in the far north and, critics say, to dispense patronage and wield political influence.