( LatWp ) - The state-controlled energy giant Gazprom on Friday bought a vast natural gas field in Siberia from a unit of British-based petroleum conglomerate BP, continuing the Kremlin's policy of shifting control of the country's major energy projects from foreign to state hands.
The terms of the multifaceted deal, which also created a new investment alliance between Gazprom and BP, were more favorable to BP than analysts and some company executives had predicted. They had feared that BP could walk away with next to nothing.
``It could have been a lot worse for BP,'' said Jonathan Stern of the Oxford Institute for Energy Studies. ``The last thing BP wanted to do is to either get thrown out of the project or walk out on bad terms. They are still in a great position in Russia.''
The company continues to have major oil holdings here, which account for 10 percent of its global revenue, analysts said. And BP obtained an option to purchase a 25 percent stake in the field within 12 months, which would allow it to share in potentially vast profits.
Under the deal, TNK-BP, BP's joint venture with a group of Russian tycoons, will sell its 62.89 percent stake in the Kovykta gas field, in the Irkutsk region of eastern Siberia, for $700 million to $900 million, according to a BP statement. Gazprom said the price would be fixed in 90 days. BP had already invested about $500 million in the field.
BP and Gazprom also agreed to invest at least $3 billion jointly in energy projects in Russia and around the world. ``This historic agreement lays the ground for powerful cooperation,'' said BP Chief Executive Officer Tony Hayward.
Such an alliance will bolster Gazprom's presence in international markets, where it has met with suspicion because it is sometimes viewed as an opaque instrument of the Kremlin.
``Gazprom was always interested in getting into distribution chains and closer to end consumers in Europe and Asia where the retail margins exceed internal margins by 100 percent. But it met resistance,'' said Artyom Konchin, an oil and gas analyst at Aton Brokerage in Moscow. ``BP didn't have a strong hand, but it played its hand well.''
Russian officials had accused TNK-BP of failing to meet its license requirements for the Kovykta field, which holds nearly 106 trillion cubic feet of natural gas. President Vladimir Putin recently noted that the field contains the equivalent of all of Canada's reserves.
TNK-BP was supposed to produce and ship 318 billion cubic feet of gas a year, but was unable to do so because it couldn't move that much gas out of the field. Local demand was much smaller. Gazprom, which monopolizes distribution, refused to build a pipeline to ship the gas to potential markets in China or South Korea.
Russian officials had no sympathy for BP's quandary, and some had suggested that the company might simply be stripped of its license, which would then be re-auctioned.
``They knew about these problems and potential limitations,'' Putin said in an interview this month with foreign journalists. ``And they nevertheless went ahead and got a permit. I am not going to even talk about how they obtained this permit. We will let it rest in the conscience of those who did this at the beginning of the 1990s.''
The Russian Natural Resources Ministry, which had dogged TNK-BP with charges of license violations, said Friday that it could now amend the terms of the Kovykta license--something it refused to do for TNK-BP.
``The owner of the Kovykta field has been replaced, and we are now ready to listen as regards a license,'' said Rinat Gizatulin, the ministry spokesman.