Russia's TNK-BP says Kovykta unit files for bankruptcy

3rd June 2010, Comments 0 comments

TNK-BP, British oil major BP's venture with a group of Russian billionaires, said on Thursday that the unit which holds the licence to the vast Kovykta gas field had filed for bankruptcy.

TNK-BP said the RUSIA Petroleum unit is unable to pay off debt to its parent company.

"The current financial situation precludes RUSIA Petroleum from timely repayment of its loans to TNK-BP Group," the company said in a statement.

The loans had been made to the subsidiary to finance the development of the Kovykta gas field in Siberia, it said.

"TNK-BP announced its original decision to withdraw from the Kovykta project back in 2007," the statement said.

"As the major shareholder and creditor of RUSIA Petroleum, TNK-BP is determined to recover its investments and minimize its financial losses."

TNK-BP is 50-percent owned by British oil major BP with the other 50 percent belonging to a consortium of billionaire Russian industrialists.

Kovykta, located 450 kilometers (280 miles) northeast of the city of Irkutsk, contains an estimated 2.0 trillion cubic metres of natural gas and is considered a major potential source of gas for energy-hungry China.

In 2007, TNK-BP agreed to sell Kovykta to Russian state-controlled gas giant Gazprom for around 1 billion dollars in a deal seen as part of a Kremlin-backed campaign to tighten state control over energy assets.

However, the deal with Gazprom has not been finalised.

Thursday's move could help the company complete its withdrawal from the project, said Alexander Burgansky, an analyst with the Moscow-based investment bank Renaissance Capital.

"Following the bankruptcy of RUSIA Petroleum, we expect the Kovykta licence to be reclaimed by TNK-BP Ltd in lieu of debts, which should simplify the negotiation process for its disposal and maximise the sales proceeds for TNK-BP," Burgansky said.

© 2010 AFP

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