'We say maybe': Gazprom set to pounce on UK gas market

Politicians fret as Russian state-controlled giant plans takeover bid for Centrica

Gazprom is considering a takeover bid for Centrica, the Russian state-controlled gas giant has admitted.

Its deputy chairman, Alexander Medvedev, said last week that it wanted to supply a fifth of the UK's gas within a decade.

A company source, asked if Gazprom was weighing up a bid for Centrica, whose British Gas subsidiary has around 16 million customers, said this weekend: "We say maybe."

But senior UK politicians have expressed worries over a big UK energy company like Centrica ending up in the hands of Gazprom. Liberal Democrat trade and industry spokesman Norman Lamb said competition regulators should examine whether such a takeover would give Gazprom a cross- monopoly in continental Europe and the UK.

"There is a concern here over the concentration of power and concern about [Gazprom's] relationship with the Russian government," he said. "At the very least, there needs to be a bit of thought given as to whether this is strategically wise.

"Within the UK, monopolies are looked at and you can raise concerns, but there is no comparable agreement over international monopolies."

Peter Luff, the Conservative chairman of the influential Commons Trade and Industry Select Committee, said: "I have reservations about Gazprom because of its ownership structure. One has been nervous about a company like that for a long time. But it's the world we live in."

His predecessor, the Labour peer Lord O'Neill, said he had no problem with UK energy companies being owned by foreign companies, but added: "If there is going to be another takeover of a UK energy company, I would prefer it if it was by a company other than Gazprom. The Russian government is not the most transparent of institutions."

Alex Salmond, the leader of the Scottish National Party, said: "It's hard to see Russian energy companies as being anything other than arms of the state at the moment."

Shares in Centrica, which has a market value of £9.5bn, ended the week 5 per cent up on the back of the takeover speculation. There were also rumours that the Russian company was stalking Scottish Power. But analysts said that Centrica would be a much better fit.

Gazprom owns most of Russia's vast gas reserves and its pipe network, which supplies Europe. It has a small trading arm in the UK that sells gas to large industrial companies, but does not have a retail supply arm.

Centrica, which provides over half the UK's gas and electricity to households, does not pump enough gas of its own to supply all its customers. So it has to buy gas in the wholesale market, where prices have doubled in the past year.

Gazprom caused panic across Europe earlier this month when, under orders from the Kremlin, it cut supplies to Ukraine in a dispute over prices. The row underlined Europe's dependence on Russian gas and the political power wielded by Gazprom.

Under current rules, the Office of Fair Trading can only refer takeovers involving newspaper and defence groups to the Department of Trade and Industry on public interest grounds. The energy regulator, Ofgem, gives advice to the OFT on energy takeovers, but its remit is limited to protecting competition and consumers; it cannot veto a deal.

The influence of the Russian government in business was also highlighted last week by a dispute between a Russian telecoms company, Alfa Telecom, and a telecoms investment group, Ipoc, over which owns a 25 per cent stake in a separate firm, Megafon.

It was alleged that documents could show that Ipoc, which could not be reached for comment, was ultimately owned by the Russian telecoms minister, Leonid Reiman, an ally of President Vladimir Putin.