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. Last Updated: 07/27/2016

Novatek, Gazprom Sign Cooperation Agreement

Gazprom and independent gas producer Novatek signed a broad partnership deal on Wednesday, agreeing to cooperate in areas from building new pipelines to petrochemicals.

The agreement gives Novatek some reassurance ahead of its big share offering in London this month, and amid market rumors that state-controlled Gazprom may try to claw back some assets from Novatek that were under its control in the 1990s.

Gazprom, which over the past few years regained control over a large number of assets from independent gas producers, has denied it was looking at Novatek as the next target.

Gazprom said in a statement that Novatek was recognizing Gazprom's gas export monopoly and that the two firms would cooperate on domestic issues. This would include: joint building of gas pipelines; cooperation in the gas condensate business; construction of ethylene, polyethylene, propylene and polypropylene plants; and sales by Novatek of part of its gas production to Gazprom.

"The two firms' joint efforts would help create a civilized and competitive gas market in our country," the statement quoted Gazprom CEO Alexei Miller as saying.

Novatek is a fast-growing gas and condensate producer, and it wants to double output in the next few years to 50 billion cubic meters a year -- equal to France's annual gas consumption.

Analysts have said Gazprom's recently announced plans to invest in its pipeline network and develop foreign markets might create an expansion opportunity for Russia's domestic gas companies, of which Novatek is easily the biggest.