BP's browne boosts cooperation with Gazprom, Rosneft

Energy Trade

BP Plc CEO John Browne met in Moscow with the heads of state-run Gazprom and Rosneft, Russia's largest companies by market value, as Russia cracks down on foreign energy companies.

Browne and OAO Gazprom CEO Alexei Miller discussed cooperating on „large” projects and liquefied natural gas sales, the Russian company said in an e-mailed statement today. The men will meet again in the first quarter of next year. BP Plc and OAO Rosneft will spend €543.9 million ($700 million) over the next five years to develop fields under the Sakhalin-4 and Sakhalin-5 projects through a venture they set up in 2003, Rosneft said in an e-mailed statement yesterday after a meeting between Browne and Rosneft CEO Sergei Bogdanchikov.

President Vladimir Putin is boosting Gazprom's and Rosneft's share of Russian energy riches to build the country's global political and economic power. The government is tightening control over projects led by foreign companies including BP and Royal Dutch Shell Plc. Gazprom has been buying tankers of LNG, which is gas chilled to a liquid, from companies such as BP and selling to customers in the US to gain experience in the market. Gazprom doesn't yet produce LNG itself. BP is now bidding in a tender to join Gazprom's proposed Baltic LNG plant near St. Petersburg. BP's Russian unit, TNK-BP, formed a venture earlier this month with Gazprom's petrochemical arm to refine associated gas, which is extracted along with crude oil at fields in western Siberia.

TNK-BP has been lobbying Gazprom for the right to build a pipeline and export natural gas directly from its €13.9 billion ($18 billion) Kovykta gas field in eastern Siberia to China or Korea, a plan the Russian company opposes. Russia's Natural Resources Ministry said it will review possible violations of the Kovykta license early next year. TNK-BP has said it can't produce as much gas as the license requires because the regional market isn't large enough to absorb it. Browne and Rosneft CEO Sergei Bogdanchikov signed an agreement today saying they are „satisfied” with the work at Sakhalin-4's West Schmidt field and Sakhalin-5's East Schmidt field. The companies have already spent €62 million ($80 million) on exploration. (Bloomberg)

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