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Tom Nicholls: BP and Eni among Baltic LNG contenders

By Tom Nicholls

BP, Eni, Petro-Canada are in the running for a stake in Baltic LNG. Four foreign companies have been shortlisted for an equity share in the venture, according to a source involved with the project, and two of them are likely to be selected as project partners – probably in the autumn. The fourth company is a Japanese firm – Mitsui or Mitsubishi. The winners are set to take a minority share in the liquefaction terminal, to be sited near the Primorsk oil terminal, and are likely to be involved in marketing the gas – destined for the US and Europe. Proposed capacity is between 5m and 7.2m tonnes a year and the gas will be supplied from the Russian grid, as Gazprom expands its marketing reach way beyond Europe. Petro-Canada has long been considered a likely participant. In 2004, the company signed a memorandum of understanding (MOU) with Gazprom to investigate a US-focused LNG project in the St Petersburg region. Last year, the two companies undertook engineering studies for Baltic LNG. The quid pro quo is that Petro-Canada would give Gazprom access to LNG-receiving facilities in North America. BP also has also fostered closer ties with Gazprom in the LNG business. In September, BP agreed to supply Gazprom with a supply a number of LNG cargoes for marketing in the Atlantic Basin. The deal is likely to pave the way for deeper co-operation, possibly within the Russian market. Eni has a strong chance of success too because of its healthy commercial partnership with Gazprom. Earlier Already the second-largest importer of Russian gas after Germany – with around a third of its gas being supplied by Russia – Eni and Gazprom recently agreed to extend existing supply agreements until 2035. In addition, Eni and TNK-BP took part in the recent auction of Yukos assets – doing their relationships with the Kremlin and Gazprom no harm. Mitsui and Mitsubishi, meanwhile, are partners of Gazprom in the Sakhalin-2 LNG project. However, Algerian energy minister Chakib Khelil has confirmed that Sonatrach – which was thought likely to find its way onto the shortlist because of its experience of LNG projects and the co-operation agreement it has with Gazprom – is not among the four. Shareholdings in Baltic LNG are, at present, Gazprom, 80%, and Russian shipping firm Sovcomflot, 20%.