Moscow (Platts)--27Nov2012/606 am EST/1106 GMT

Russia's Rosneft has signed contracts with Finland's Fortum and Germany's E.On to supply natural gas to their power stations in Russia as the oil company continues expanding operations in the domestic gas market, according to Rosneft's Eurobonds prospectus.

Rosneft has signed a 5-year contract with Fortum for the supply of around 2.3 billion-2.5 billion cubic meters/year, said the document seen by Platts Tuesday. It has also inked a 3-year agreement with E.On for the supply of around 1.6 Bcm/year, the document said.

Supplies to Fortum would amount to 12 Bcm for a total of Rb 49.3 billion ($1.6 billion), while E.On would be supplied with 4.65 Bcm of gas for Rb 13.9 billion ($450 million), analysts at VTB Capital calculated.

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Earlier this month Rosneft said it had entered into a 25-year contract with power utility Inter RAO UES for the supply of up to 875 Bcm of natural gas. That contract envisages annual supplies of up to 35 Bcm of gas produced by Rosneft to Inter RAO's power plants from January 1, 2016 to December 31, 2040, the company reiterated in the prospectus.

Rosneft's expanding of gas sales contracts is negative for Gazprom, as it once again shows that the gas giant continues to lose customers, not only in the European market but also domestically, analysts at VTB Capital said in a research note.

"From Rosneft's point of view, this news is positive, showing that the company continues to grab domestic gas market share in line with the previously announced plan to sell some 75 Bcm of gas in Russia by 2016," it said.

Signing of new gas supply contracts "looks supportive sentiment-wise as Rosneft continues to actively expand its presence in the domestic gas market, with utilities being the major gas customers," analysts at Alfa-Bank said. Rosneft intends to boost its gas production to 100 Bcm/year in the long term, from the 12.8 Bcm of natural and associated gas it produced in 2011.

As part of its gas expansion strategy, Rosneft earlier this year entered into a joint venture with Itera gas producer by purchasing a 51% interest in the company.

Itera's own natural gas production is expected to amount to 12.8 Bcm in 2012 and remain at the same level in 2013, up from 12.6 Bcm in 2011.

--Nadia Rodova, nadia_rodova@platts.com --Edited by Wendy Wells, wendy_wells@platts.com

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