Claudia Cattaneo of the Financial Post has a great column on the Petro-Canada and Gazprom fiasco:
Marrying Gazprom like Russian roulette Claudia Cattaneo, Financial Post The best deal Petro-Canada will make this year is one it didn’t do — a partnership with Russian gas giant Gazprom. After four years of courtship, openly encouraged at first by politicians from both Canada (when the Liberals were in power) and Russia, Gazprom abandoned Petro-Canada at the altar last week. In an e-mailed statement from CEO Alexei Miller, Russia’s flagship enterprise said it had cancelled plans to build a liquefied natural gas plant near St. Petersburg so it could concentrate on its Shtokman arctic gas field and its Nord Stream pipeline to Germany. Geez, what a surprise!
Considering the number of deals Gazprom dangled in front of reserves-hungry international oil companies, then dropped with lame excuses, the opposite would have been shocking.The downside for Petro-Canada– that it is now challenged to find alternative supplies for its Gros Cacouna regasification terminal in Quebec — pales in comparison with the gain of not climbing in bed with a state-controlled colossus with a long track record of using its supplies for political purposes and playing companies against each other, and a short track record of getting things done.Canada, meawhile, dodged a bullet. A Russian state-controlled investment in Canadian energy infrastructure to facilitate Russian gas exports to the United States would have opened a can of worms, given growing alarm here about foreign investment in Canadian resource companies, and little political appetite in the United States for an invasion of Russian gas.Yesterday, we were reminded once again about Gazprom’s hardball tactics when the company was on the verge of cutting off gas supplies to the Ukraine in a dispute over unpaid debt.Petro-Canada’s wild adventure started nearly four years ago with talks with Gazprom about an ambitious strategy to sell Russian gas to energy-hungry North Americans. Original plans called for Petro-Canada to partner with Gazprom to develop the supergiant Shtokman gas discovery and help build a liquefaction terminal near St. Petersburg, coincidentally the home town of Russian President Vladimir Putin, so the gas could be moved in liquid form by tanker to North America.The $3.6-billion strategy became the centrepiece of a visit to Moscow by then prime minister Paul Martin in October, 2004. Within a short period, Petro-Canada was dropped from a short list Gazprom was considering to develop Shtokman. The other companies were later dropped, too. The Canadian company then focused on the St. Petersburg plan, even moving forward with feasibility studies. By 2005, Gazprom was already signalling it may scrap that proposal. Then it invited other firms to bid for a role. Gazprom’s decision to back off on the LNG terminal came after Petro-Canada offered it a 20% stake in the Quebec facility.Gazprom may indeed have felt it would have spread itself too thin by taking on Shtokman at the same time as building an LNG terminal, a glaring statement in itself about its ability to handle complex projects. Given its track record, it wouldn’t be a surprise if it didn’t see enough political upside in a partnering with a plain Canadian company that just wanted to grow its business.