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Collapse of the Kovykta Deal between Gazprom and TNK-BP

Gazprom threatens to quit the deal of buying 63 per cent stake in Kovykta, because experts consider it worthless

According to Financial Times, the threat reflects the financial pressure on Gazprom, which is being forced to focus on its essential investments in relatively short-term projects.

Gazprom agreed to buy TNK-BP’s 63 per cent stake in Kovykta, a field in eastern Russia, in June last year as part of a settlement to resolve a dispute over the license for the field.

Kovykta is estimated to hold more gas than the entire proved reserves of Canada or Kazakhstan, and is a potentially important source of gas supply for Asian countries such as China and South Korea in the second half of the next decade.

However, Gazprom believes that its value is highly uncertain, given the long-term nature of the development, and also thinks the license for the field is likely to be taken away from the TNK-BP-led consortium that runs it.

One Gazprom executive told the Financial Times the company was dubious about paying hundreds of millions of dollars for a potentially worthless asset.

Nevertheless, Gazprom and BP said the Kovykta deal cancelling would not necessarily end their plans for broader co-operation.

The credit crunch and the fall in oil prices are forcing Gazprom to focus on the development of gas production and infrastructure in Russia with projects that will show results more quickly.

Author: Ksenia Kochneva