download new mediaplan 2008



Sign up for a 12 month subscription to Oil&Gas Eurasia and receive our quarterly Eurasia Offshore for FREE.

Sign up for a 12 month subscription to Oil&Gas; Eurasia
and receive our quarterly Eurasia Offshore for FREE.

download new mediaplan 2008
November 10, 2007
Advanced Search


Login:

Password:

Forgot your password?
Register now

Home / Issue Archive / 2007 / February #2 / British Petroleum, Gazprom Discuss Joint Venture

№ 2 (February 2007)

British Petroleum, Gazprom Discuss Joint Venture

Russian gas giant Gazprom announced it was in talks with BP on forming a joint venture hoping to develop its business in the international liquefied natural gas market and expand partnership opportunities with the U.K. based energy supermajor. BP Plc. CEO Lord Browne and member of BP group’s Chief Executive’s Committee Tony Hayward who is set to become Browne’s successor met with Gazprom Chief Executive Alexei Miller on Thursday to discuss the possibilities of establishing an international joint venture for liquefied natural gas. The companies did not disclose any other details of the meeting. According to Dow Jones Newswires, Hayward and Browne later met with Gazprom Board Chairman and first deputy Prime Minister of Russia Dmitry Medvedev to proceed with the negotiations.

By Sergei Balashov

Among other issues raised at the meeting was BP’s Russian joint venture TNK-BP’s ongoing dispute with Gazprom over its two major gas projects Kovykta and Rospan. According to Financial Times’ analysts, BP’s willingness to cooperate on the international level could be seen as an attempt to "ease the deadlock." TNK-BP has been facing Russian natural resource ministry’s complaints about its inability to fulfill the obligation to annually produce 9 billion cubic meters of gas on the Kovykta field, accompanied by warnings of a possible license revocation. 

Gazprom’s motivation to establish a long term alliance with BP is understandable, given the company’s apparent desire to boost its position in the international LNG markets. Gazprom, which doesn’t produce its own liquefied natural gas, recently bought a controlling stake in the World’s largest LNG project Sakhalin-2 for $7.45 bln as a part of its aggressive expansion strategy. The gas monopoly earlier paid $13 bln for Roman Abramovich’s Sibneft turning it into its own oil division Gazprom-Neft, and is mulling purchase of the British Centrica group, which reported its overall turnover at the level of over $32 bln in 2006 and owns the British Gas company. The possible deal has already been endorsed by the British Prime Minister Tony Blair. 

The timing for forming such a venture couldn’t be better, as Reuters reported that deliveries of liquefied natural gas for a long time ahead have been sold at record prices, whilst the investment costs climb. The agency quoted the Wood Mackenzie analyst Frank Harris, who said that there would be "a shortage of LNG on a long-term basis," adding that "if all the existing supply works as expected, there will be just about enough capacity to meet demand in 2010." With prices going up as the energy companies need the LNG volume, they will "pay the price" to secure this volume. The current trends fully explain Gazprom’s desire to take its own niche in the market, and suggest that the cooperation efforts with BP might soon find a practical implementation. 

If established, the joint venture will not be the first collaborative LNG effort of the two companies. In September 2006 Gazprom’s British subsidiary Gazprom Marketing&Trading signed a deal with British Petroleum to supply a number of LNG cargoes to market them in the Atlantic basin. Gazprom’s Deputy Chairman Alexander Medvedev was quoted saying that he was "pleased with this agreement with such a strong and well regarded partner as BP, as Gazprom is continuing to look at ways to increase its LNG portfolio for a successful development of its LNG strategy and the benefit of its customers."

Copyright © 2007 Eurasia Press, Inc. (USA). All rights reserved.
Copyright © 2007 Eurasia Press (www.eurasiapress.com)