Russian gas giant moves in on British consumers

Gazprom is planning to sell energy direct to UK households using its own brand name, undercutting British Gas and other gas and electricity suppliers.

The Russian gas giant already provides a quarter of Europe's wholesale gas to domestic suppliers. But in a move that will alarm other gas and electricity retailers, Gazprom intends to cut out the middle man and sell straight to households in Britain - the only fully liberalised energy market in Europe.

Significantly, the group wants to use its "Gazprom" brand. By offering lower bills, this would improve its battered image. The move will also underline how reliant the UK is becoming on Russian energy. Gazprom owns vast gas fields in Russia and controls much of Europe's pipeline network, which pumps the gas west.

Because the UK's North Sea gas reserves are dwindling rapidly, British suppliers are having to buy more Russian gas. Suppliers usually make generous margins on the difference between the wholesale price they pay for gas and the higher retail price they charge customers.

But Gazprom executives now realise that by supplying the gas direct to households, the company could undercut existing suppliers, further boosting its profits.

Last year, Gazprom bought a small UK energy retailer, Pennine Natural Gas, which supplies business customers. It claims it has since tripled its customer base by signing up big names such as department store Bhs. It is also thought to be targeting the NHS.

Analysts have speculated for months that Gazprom could mount a takeover of Centrica, the owner of British Gas. Financially, this would not be hard for the Russian company, which has a market value of £125bn and enjoys a virtual monopoly over Russia's vast energy reserves.

But there could be political opposition in the UK to such a deal and it would be easier for Gazprom to build up a residential retail business instead.

Al Breach, the chief strategist at Brunswick UBS, the Moscow arm of the Swiss investment bank, said: "It's a sign of confidence and a good bit of Russian chutzpah. The Russians are starting to be bothered about brands. They understand their public relations is terrible, which makes life difficult for them."

A spokesman for Gazprom said the company had no immediate plans to launch a retail business in the UK, but added: "We do have ambitions to sell all forms of energy in the value chain."