Is Kremlin Inc. Setting its Sights on Kovykta?

Will BP’s Kovykta project become the next Sakhalin-style seizure? From Oliver Morgan in the Sunday Observer:

Kremlin Inc ready to take on the West For Kremlinologists and other followers of Russian affairs, 1 January should perhaps have been Groundhog Day, not New Year’s Day. Then, as 12 months before, the mighty Russian bear was growling at a former Soviet neighbour, threatening it not with tanks but with higher gas prices. As with Ukraine in 2006, Belarus was threatened this year with a cut-off if it did not agree to pay more than twice what it had been paying Gazprom, the Russian monopoly, for its gas, as well as allowing that company – in reality an arm of the Kremlin – a 50 per cent stake in its national pipeline network, Beltransgaz. It agreed. … Analysts agree there remain two obvious targets for the Kremlin – Sakhalin-1 and the TNK-BP joint venture – and think Putin will want control of these by the end of the year. He stands down in the middle of 2008. There was skirmishing last year over Sakhalin-1, which sits on 2.3 billion barrels of oil and 17.1 trillion cubic feet of gas. The IOC consortium, led by Exxon (with 30 per cent) and including ONGC (20 per cent) and Japanese investment company Sodeco (30 per cent) was accused of licence violations by the natural resources ministry. But this year more significant developments are likely. Butter says: ‘Exxon needs a gas export solution. Gazprom has a monopoly position in gas exports. I would imagine they would be interested in an equity stake.’ That stake would not have to be 51 per cent to secure Russian control, as two subsidiaries of Rosneft already hold a total of 20 per cent. As for TNK-BP, Butter says: ‘It is a 50:50 joint venture. The Russian partners in that are Alfa Access Renova, who are old-fashioned oligarchs, not under government control. There has been speculation that Gazprom would be very interested in controlling this stake.’ Here, Gazprom, as the export monopoly, has leverage too. Chief among TNK-BP’s assets is the giant Kovykta gas field, which has export potential to China. BP has already said Gazprom could take majority control over the field, but wants assets or cash in recompense. Experts say this is proving a sticking point, and BP may find itself subject to pressure similar to that suffered by Shell last year. The ultimate aim would be for Gazprom to replace Alfa Access Renova, and take a controlling stake in the venture.

Read the complete article here.