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Russian gas giant to buy out BP from Siberian gas field - extended

British Petroleum (BP) has agreed to sell its interests in the East Siberian Kovykta gas field to Russian gas giant Gazprom, Russian news agencies reported on Friday. China, Korea possible buyers of Kovykta gas Gazprom's directors said Monday. 

TNK-BP, British Petroleum's Russian joint venture, has agreed to sell Gazprom the whole 62.89% stake it owns in Russia Petroleum, the company which holds the license for the Kovykta gas field, and its 50% interest in the East Siberian Gas Company (ESGCo), which is constructing the regional gasification project. Gazprom will pay $600 million to $900 million for TNK-BP's interests in Russia and ESGCo. The sum of the deal will be fixed at the current market rate within 90 days, Gazprom said. Gazprom and TNK-BP also agreed on a call option for TNK-BP to buy a 25% plus one share stake in Russia Petroleum. This option could be exercised once a significant joint investment or asset swap has been agreed under the terms of Friday's memorandum of understanding. Earlier on Friday BP and TNK-BP signed a memorandum on the establishment of a strategic alliance with Gazprom in investments in joint energy projects and a swap of assets worldwide.

The companies will form a joint group for studying strategic possibilities of investments inside and outside Russia. Gazprom and BP will set up a joint venture with equal shares with a cost of no less than $3 billion, Gazprom Deputy CEO Alexander Medvedev said on Friday. “Gazprom will own 50% and TNK-BP or BP, depending on what assets will be allocated - another 50%,” he said. The Kovykta condensate gas field is one of the largest in Russia with its reserves estimated at 1.9 trillion cubic meters of natural gas, 2.3 billion cubic meters of helium, and 115 million tons of liquid gas condensate. Russia Petroleum has a license for the Kovykta development. Its shareholders are TNK-BP, Interros and the Irkutsk regional administration.

A deputy chairman of Gazprom's board of directors said Monday that China and Korea were among potential buyers of the natural gas to be produced at the Eastern Siberian Kovytka gas field. “China and Korea are potential markets, and negotiations are being conducted with both,” Alexander Medvedev said. He also said the giant gas deposit would be developed intensively with an eye to demand on Asian markets, as well as to domestic needs. Medvedev said the Russian gas monopoly did not plan to acquire the stakes of other shareholders in the Kovykta gas field until it finalized the purchase of 63% from TNK-BP in three months' time. The private investment group Interros has a 25.82% interest in Rusia Petroleum, and the administration of the Irkutsk region, where the Kovykta gas field is located, holds the remaining 11.24% of the stock. According to Medvedev, Gazprom expects record-high export revenues in 2007 after the state-controlled company saw its export revenue grow 42.5%, year-on-year, in 2006, to $37.2 billion. (,