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Eni enters Russia's downstream gas market with power plant deal

MOSCOW, July 8 (RIA Novosti) - Eni has signed contracts to supply gas to power plants in Russia's Urals region, a sale and purchase debut for a European firm on the Russian downstream gas market, the Italian energy company said Tuesday.

Under the terms of the contracts, signed on June 1 by Eni's wholly owned subsidiary Eni Energhia and TGK-9, which owns power plants in the Perm Territory, as much as 350 million cubic meters of gas will be sold by 2010.

"Thanks to the new contracts, Eni will become the first European player to enter the Russian gas downstream market through sale and purchase deals," Eni said in a news release.

"Moreover, this success represents a fundamental step towards the development of Eni's presence in the Russian market, and to achieving the target set out in the strategic plan 2008-2011 of 900 million cubic meters to be sold in 2011."

Eni is a leader in the European gas market and these contracts advance its strategy of entering major new markets.

Russia is the second largest consumer of gas worldwide and the Russian government is pursuing a gradual plan of price increases that should bring domestic gas prices into line with European ones between 2011 and 2014, excluding transportation costs and export taxes.

Commercial relationships between Eni and Russia date back to the early 1950s. Cooperation between Eni and Russian energy giant Gazprom, which started in 1969, has significantly developed and strengthened in recent years.

In November 2006, Eni and Gazprom signed a strategic agreement to launch joint projects in the mid- and downstream gas markets, as well as in the upstream sector and in technological cooperation.

In June 2007, both companies signed a memorandum of understanding on the construction of South Stream, a gas pipeline system that would link Russia to the European Union across the Black Sea.

In April 2007, Eni was also awarded, through the EniNeftegaz consortium, the assets of Lot 2 in the Yukos liquidation procedure, securing it a stake in Russia's upstream sector.

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