BP Sells Vast Russian Gas Field To Gazprom

BP said June 22 that it had agreed to sell its stakes in a Siberian gas field and company to Russian gas giant Gazprom for up to $900 million. "BP and TNK-BP today announced that they have signed a memorandum of understanding to create a strategic alliance with the Russian gas giant, Gazprom, to invest jointly in major long-term energy projects or swap assets around the world," BP said.

Under the terms of the agreement, BP's Russian joint venture TNK-BP has agreed to sell to state-owned Gazprom its 62.89% stake in Russia Petroleum, the company which holds the license for the vast Kovykta gas field in East Siberia. TNK-BP has also agreed to sell its 50% interest in East Siberian Gas Company (ESGCo). It added that TNK-BP and Gazprom would immediately establish a joint team to identify investment opportunities in and outside of Russia.

The Kovykta gas field is about 280 miles from the city of Irkutsk in the north of the Irkutsk region of Eastern Siberia. It is estimated that the field has resources totaling about 2.0 trillion cubic meters of gas, BP said.

Gazprom's involvement had already been mooted as a possible solution to a dispute between BP and Russian authorities over licensing the British firm to exploit the huge Siberian gas field. Russian officials have repeatedly threatened to remove the license as the project has failed to meet production targets. But following the announcement, the deputy head of Russia's environmental monitoring agency said: "Considering the change of circumstances, extra time could be given for fulfilling the conditions on the license.

The announcement would appear to be the latest of several moves by Russia, the world's biggest exporter of gas and a leading oil producer, to edge out foreign energy firms and take control of its own precious resources. British-Dutch oil group Shell has been forced to sell Sakhalin-2 in far eastern Russia, one of the biggest private oil and gas projects in the world, to Gazprom after pressure from Russian authorities over alleged environmental violations.