BP sells gas field stake
London, June 23, 2007
British oil firm BP has sold its stake in a Siberian gas field development to Russian state-controlled firm Gazprom.
BP's Russian joint venture TNK-BP has agreed to sell Gazprom its majority interests in the giant Kovykta field for between $700 million-$900 million (£350m-£450 million).
Analysts said this is a fraction of what TNK-BP's stake is worth, and that it is the latest example of the Kremlin forcing out Western energy firms.
Kovykta is said to have enough gas to supply all of Asia for five years.
The sale comes after Russian authorities had put increasing pressure on TNK-BP, saying the firm was not producing enough gas from the Kovykta field.
Russian officials claimed that under the terms of its licence, Kovykta should have been producing nine billion cubic metres of gas per year by 2006, rather than the less than 2.5 billion cubic metres actually being processed.
TNK-BP said that it could not produce any more because the local region did not require additional supplies and it had been denied an export licence.
Similar pressure was put on Anglo-Dutch energy group Shell last year, before it sold Gazprom its majority stake in the Sakhalin-2 oil and gas project off Russia's Pacific coast.
Shell sold its interests in Sakhalin-2 after Russian authorities continually refused to grant it the necessary environmental certificates.
BP said it and TNK-BP were now looking to invest in projects with Gazprom 'in major long-term energy projects or swap assets around the world'.
The firms will set up a joint team to identify strategic opportunities for investment both overseas and inside Russia.
'We will initially be looking for projects of at least $3bn, but the potential for further growth could be very significant,' said BP chief executive Tony Hayward.
'This historic agreement lays the ground for powerful co-operation between BP, TNK-BP and Gazprom.'
Gazprom is buying TNK-BP's 62.89 per cent stake in Russia Petroleum, the firm with the licence for the Kovykta gas field.
TNK-BP is also selling Gazprom its half-share in East Siberian Gas Company, the company constructing the wider regional gasification project, BP said in a statement.