Gazprom Looks into French Pipeline Company?

Sometimes the best indication of what Gazprom is going to do is what they specifically insist they won’t do. Perhaps for this reason, rumors on European markets that Gazprom is interested in acquiring the French steel pipe manufacturer Vallourec simply won’t die down, despite the Russians’ repeated statements that they are not interested in this acquisition.

The Daily Mail, which was one of the first papers to carry the rumor, reports that Vallourec may be prepared to accept an offer from Gazprom for 280 euros a share, and the FT Alphaville Blog estimates that this acquisition could cost Gazprom upwards of 12 billion euros (a small price to pay to contribute to Russia’s revival as a world power). An analysis from Forbes, excepted below, speculates that although Vallourec makes perfect strategic sense for Gazprom, the Russians are especially interested in doing more business in France as opposed to Britain for political reasons. As this potential deal develops further, we are sure to see further controversy and concern. Forbes:

Nomura analyst Xavier Grunauer said that the fact that Gazprom had actually issued an outright denial – often it allows such speculation to waft over it – was itself interesting. “Something may be cooking,” he said. One possibility could be a tie up between the two companies, by which Vallourec supplies Gazprom with specialist services and equipment. Some of Gazprom’s ventures have taken it into inhospitable conditions such as the Shtokman project in the Barent Sea, for which Vallourec could provide steel products. “There may be an opportunity for the French company to help Gazprom in their endeavors,” he said. “It is possible that they may be included in something fairly significant.” One reason that the rumors are refusing to die is that the acquisition of Vallourec would make strategic sense for Gazprom or any energy company trying to tap into new crude supplies as current reserves dry up. Vallourec already provides specialist vertical piping – used for drilling rather than long distance transportation – to some of the world’s leading petroleum companies, such as Total (nyse: TOT – news – people ), Exxon Mobil, Petrobras (nyse: PZE – news – people ) and Royal Dutch Shell (nyse: RDSA – news – people ). One possibility is that the acquisition could be made not by Gazprom directly but by a company linked to it. The fact that it is a French company also counts in Vallourec’s favor when it comes to speculation about Gazprom. As Russia’s relations with Britain have chilled recently, relations with France have got increasingly cosy. A meeting with President Vladimir Putin and France’s President Nicholas Sarkozy was thought to have helped Total score a major victory in becoming the operator of Russia’s Shtokman fields.