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TNK-BP wishes to have sold its Kovykta Russian gas field by the end of the year

TNK-BP aims to sell its Kovykta gas field to the Russian state by the end of this year and earn at least $700 million bowing out of a ownership tug-of-war that sapped investor confidence.

 

TNK-BP aims to sell its Kovykta gas field to the Russian state by the end of this year and earn at least $700 million bowing out of a ownership tug-of-war that sapped investor confidence. Viktor Vekselberg, a billionaire TNK-BP shareholder, told Reuters today that the company planned to sell Kovykta to Rosneftegaz, a state holding company with stakes in oil sector leader Rosneft and gas export monopoly Gazprom. "The price range is between $700 million and $900 million," Vekselberg told reporters on a trip to western Siberia, where he was accompanying President Dmitry Medvedev and senior government officials.

 

"We plan this year to close the deal," said Vekselberg, one of the four Russia-connected businessmen who together own half of TNK-BP. UK supermajor BP owns the other 50%. The decade-old dispute over Kovykta, a lucrative eastern Siberian field holding enough gas to meet world demand for eight months, spooked investors wary of the Kremlin's track record of expropriating assets from private business.

Russian officials have long argued that TNK-BP be stripped of Kovykta for failing to meet its licence terms. Environmental watchdog RosPrirodNadzor gave weight to this argument with its February ruling on the case. Licensing policy is governed by another body, Rosnedra, which has not spoken publicly about the fate of Kovykta.

 

TNK-BP has said it cannot bring output to the levels stipulated by its licence because state-run Gazprom has a monopoly on Russian gas exports, effectively closing the Chinese market to Kovykta's 2 trillion cubic metres of gas reserves. Talks between TNK-BP and Gazprom over the sale of the assets have previously broken down as the companies were unable to agree on price. Vekselberg stressed today that TNK-BP aimed to sell the field to Rosneftegaz, not Gazprom. Rosneftegaz is the majority shareholder in Rosneft, Russia's largest oil producer, and also owns a stake of just over 10% in Gazprom.

 

Kovykta's huge reserves place it in the strategic category, meaning that Gazprom could theoretically snap up the deposit free of charge should TNK-BP be stripped of its licence, Reuters said. Russia's foremost energy official, Deputy Prime Minister Igor Sechin, said this month that TNK-BP should be compensated for the costs it has incurred developing Kovykta, assuring the market there would be no "blatant expropriation" of the asset.

Source : Upstream