Gazprom wins TNK-BP's Siberian field

1st March 2011, Comments 0 comments

Natural gas giant Gazprom won control Tuesday from British energy major BP's Russia venture of a massive Siberian field that the Kremlin hopes to use to expand energy exports to China.

The Kovykta field in the Irkutsk region of southern Siberia had once been instrumental to the British giant's efforts to deliver gas through pipelines to South Korea and nearby China.

But Anglo-Russian firm TNK-BP was unable to secure an export license from the Russian government and was eventually forced to liquidate the company that controlled its stake in the field.

The vast Siberian field is expected to produce about as much gas per year as China currently receives from Central Asia's main energy exporter, Turkmenistan.

Gazprom won the stake Tuesday after outbidding a subsidiary of Rosneftegaz -- a company that holds the Russian government's stake in the country's largest oil producer Rosneft.

The price paid by Gazprom was "significant compared to the starting price of 15.83 billion rubles ($548 million)," Alexander Smetanin, the top official with the RUSIA Petroleum company through which TNK-BP held its stake, told ITAR-TASS.

RIA Novosti quoted an unnamed source as saying that Gazprom paid about one and a half times more than the opening price. Further details were expected from auction officials on Wednesday.

The field was at one stage become emblematic of Western oil majors' high-stakes battles with the Russian government.

TNK-BP acquired control of the RUSIA Petroleum company that had initially begun to develop the field in 2003.

It soon assumed major exploration and pilot production work that expanded Kovykta's confirmed natural gas reserves from 346 billion cubic metres to more than two trillion cubic metres.

RUSIA Petroleum said it expected to produce 30 billion cubic metres of gas per year once the field was fully operational -- the same amount energy-hungry China is due to receive from Turkmenistan.

All those plans came to a crashing halt when the Russian government refused to support TNK-BP's bid for an export license.

The company was put under further pressure when it risked losing its rights to the field outright for refusing the meet the Russian state's Kovykta production quotas.

The move was widely seen as part of the government's efforts to re-establish control over national energy resources at a time soaring global commodity prices.

It coincided too with Royal Dutch Shell's loss of control of its Sakhalin project in the Pacific and the Russian government's dismantlement of Mikhail Khodorkovsky's Yukos oil giant.

TNK-BP eventually agreed to sell its stake in Kovykta for about $1 billion to Gazprom but the 2007 agreement was never realised after pricing and other disputes.

RUSIA Petrolium filed for bankruptcy in June 2010 in a move that analysts said represented another attempt by TNK-BP to part with its ill-fated stake.

© 2011 AFP

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