WINGAS uses liberalisation to drive further growth in Europe

Contribution to income from operations increases further

For Wintershall AG, natural gas trading is an increasingly important factor in its business success. Wintershall's natural gas trading business, operated jointly with the world's largest natural gas producer OAO Gazprom, already generates about a quarter of Wintershall's total operations income. "We have completed another chapter in the success story of unprecedented cooperation," stated Dr. Rainer Seele, a Member of Wintershall's Board of Executive Directors and WINGAS' senior management spokesperson. "Results for the gas trading business are characterised by an underlying trend of value-enhancing growth."

Overall, the sales volume for all three of our affiliates - WINGAS, WIEH (Wintershall Erdgas Handelshaus GmbH) and WIEE (Wintershall Erdgas Handelshaus Zug AG) - amounted to 238.6 billion kilowatt hours - a significant 11 per cent increase on the volume recorded for 2001.

WINGAS managed to expand its position further despite the sluggish German market. Excluding sales to WIEH, WINGAS increased natural gas sales by nine per cent to 131.1 billion kilowatt hours in 2002 (2001: 120.7 billion kilowatt hours). The joint venture's objective for 2003 in the German market is to increase sales further. In Seele's opinion, "This is no easy challenge, but one that can be achieved."

WIEH's deliveries showed a particularly positive trend - increasing by 6.5 billion kilowatt hours to 73.2 billion kilowatt hours due to special sales. These figures exclude volumes sold to WINGAS. In Romania, after a difficult year in 2001, WIEE significantly increased its sales once again. Sales rose by 29 per cent to 34.3 billion kilowatt hours, compared with the previous year.

WINGAS is determinedly using the continuing liberalisation of the European natural gas market for strengthening its activities beyond the German domestic market. To this goal WINGAS and OOO Gazexport concluded a general agreement for the marketing of Russian natural gas to the marked places in Belgium in Great Britain. In addition WINGAS concluded initial medium-term delivery agreements with industrial customers in Belgium.

In 2002, 20 transport agreements were concluded utilising third-party networks. WINGAS continued to improve conditions for easier and more transparent third-party access to its natural gas pipeline system. Six clients have concluded transportation agreements with WINGAS. However, the number of transport and storage enquiries from third parties fell last year. Seele stated that one of the main reasons for this was the withdrawal of various international energy traders from the natural gas market and the associated uncertainty among industrial clients and municipal utilities regarding new providers.

As in 2001, WINGAS continued to invest in the natural gas pipeline system - primarily to optimise use of its infrastructure and to connect new customers to its network. By the new gas year, direct supply to six WINGAS customers - mainly in the southern part of the pipeline network - was achieved within a short timeframe. Last year, WINGAS' pipeline network exceeded the 2,000 km mark. It connects the major Siberian gas reserves with the growth markets of Western Europe. It also enables WINGAS to access Europe's continuously developing spot markets. WINGAS has about one fifth of Germany's total available storage capacity through its more than 4 billion cubic metre natural gas storage facility in Rehden. So far, investment in developing the WINGAS natural gas trading business exceeds € 2.7 billion.

"Pipeline construction and wheeling are independent and necessary elements in achieving complete liberalisation of the natural gas market. Even the most efficient wheeling management cannot be a substitute for pipeline construction," Seele stressed. He also said that this is particularly true in regions where significantly high gas consumption growth rates are expected. As an example, he cited the approximately 500 km gas pipeline currently planned by WINGAS and Ruhrgas in Southern Germany. "Matching transport capacities with increasing natural gas demand in the future is vitally important for the long-term security of natural gas supply."

In the area of procurement, Gazprom remains WINGAS' most important gas supplier. "For many years, Russia has provided Germany with secure and reliable gas supplies," explains Seele. WINGAS also procures gas from the North Sea and uses opportunities on the spot markets, particularly Zeebrugge, to supplement Russian gas supplies.

No positive impetus through legal unbundling

Looking to the future market, Seele viewed the EU's scheduled legal unbundling of natural gas trading and gas transport as a wrong turn for further liberalisation of the European gas markets. "This brings no additional positive impetus, because the real aim of unbundling - the guarantee of transparent network access and elimination of cross-subsidies - is already ensured through the unbundling of accounting," Seele says. "Legal unbundling is an unparalleled infringement of entrepreneurial freedom and there is concern that it will result in unfortunate trends that will endanger the gas supply efficiency experienced in the past."

On the other hand, the view of the WINGAS Managing Director is that need for action lies in the fair balancing of the interests of producers and consumers, as well as restricting the vertical integration of companies.

WINGAS GmbH is a joint venture company of Wintershall (65%) and Russia's OAO Gazprom (35%). It has been active since 1990 in gas supply and delivers natural gas through what is now 2,000 kilometres of long-distance network to town and city works, major industrial concerns and regional gas supply companies in Germany. More information: www.wingas.com

Forward-looking statements

This release contains forward-looking statements under the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections of BASF management and currently available information. They are not guarantees of future performance, involve certain risks and uncertainties that are difficult to predict and are based upon assumptions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements of BASF to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed in BASF's Form 20-F filed with the Securities and Exchange Commission. We do not assume any obligation to update the forward-looking statements contained in this release.

P-9 - 03/25/03

Contact
Michael Sasse
fon: +49 561 301-3301
fax: +49 561 301-1321
press@wingas.de

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