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“Premature Gasification” for BP in Russia, Shell Gets a Turkey Deal

These days it seems that Gazprom enjoys attacking foreign energy companies inside Russia, while at the same closing deals with them abroad. Case in point, during BP CEO Lord Browne’s emergency visit to Moscow this week to defuse the TNK-BP crisis at Kovykta, the message from the Kremlin seems to be “sorry, chap, but we’re going to have to take this bit of property off your hands. But perhaps we can do a nice gas deal outside of Russia, eh? We could use your help moving the product we lifted off your competitor, Shell.”

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Lord Browne, meet Oleg Mitvol

So the news breaking this evening is that Gazprom and BP are now in preliminary talks about the formation of an international liquefied natural gas (LNG) joint venture, a move that is clearly seen as petty concession for what looks to be the upcoming theft of a majority stake in Kovykta. However, given the fact that it is Gazprom itself which is preventing BP from fulfilling its license requirements at Kovykta, this looks like an unfortunate case of “premature gasification.” The Financial Times reports the following:

TNK-BP has been locked in conflict with Gazprom over the development of its two major gas projects in Russia as the state seeks to tighten its grip over the energy sector. TNK-BP cannot sell gas from its vast east Siberian Kovykta field or its smaller Rospan unit in west Siberia without Gazprom because of the Russian gas giant’s monopoly control over Russia’s pipeline network. The two companies have failed to agree on terms in spite of numerous offers from TNK-BP for Gazprom to take a substantial stake in both projects. Gazprom has said it is not interested in Kovykta by itself. … BP’s proposal of international co-operation with Gazprom could be one way of easing the deadlock, analysts said. It could also mark the start of broader co-operation between the two companies amid mounting speculation that TNK-BP’s Russian shareholders are preparing to sell their stakes to a state-controlled company such as Gazprom this year, they said. TNK-BP’s Russian shareholders, however, have repeatedly denied they intend to sell. Gazprom needs foreign expertise to develop a position on LNG markets. The Russian gas group recently bought control of Royal Dutch Shell’s Sakhalin-2, the world’s largest LNG project, for $7.45bn following a campaign of state pressure over alleged environmental violations at the far east island. It also plans to develop an LNG facility at the vast offshore Shtokman field. Gazprom, however, has been vying with state-controlled rival Rosneft for BP’s attention.

Lest we forget, Kovykta is being targeted by a very special individual, one Oleg Mitvol, the eco-warrior slash watchdog slash sword of the Kremlin, whose battle-proven experience muscling Shell out of Sakhalin is something to reckon with.

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As for Shell, which is still licking its wounds from the Mitvol’s assault, their Turkish affiliate, Shell Enerji, has signed an agreement with Gazprom Export and BOTAŞ, Turkey’s state-owned pipeline company, to supply 250 million cubic meters of gas annually for the next 15 years. Attentive readers will recall that Turkey was cut off from Iranian gas earlier this year due to “domestic shortages,” which has stepped up reliance on Russian supply.