TNK-BP Says Kovykta Deal with Gazprom Close

Kovykta Field and Pipeline
(Click to Enlarge)

MOSCOW (Dow Jones Newswires), October 17, 2008

Negotiations between Russian oil producer TNK-BP Holding and gas giant OAO Gazprom over the giant Kovykta gas field in Siberia will be concluded within weeks, a TNK-BP spokesperson said Friday.

"The two sides have agreed on all major issues regarding the deal and at this point only technical issues remain to be resolved," the spokesperson said.

Earlier Friday, a Gazprom spokesman cast doubts as to whether a deal would be reached, saying that the company would pull out of the agreement if the license for the field isn't extended. The spokesman also said that if the deal goes through, it will happen in the near future.

TNK-BP, a 50-50 joint venture between U.K. oil major BP PLC and a group of Russian billionaires, currently has a 63% stake in Rusia Petroleum, which holds the license for Kovykta.

In June last year, TNK-BP agreed to sell its stake to Gazprom with an option to buy back a 25% plus one share stake in the project.

But the talks have between delayed, due to a long-lasting dispute between shareholders at TNK-BP.

Meanwhile, Russia's Natural Resources Ministry has put pressure on TNK-BP, accusing the company of not honoring its license commitments. This week, Resource Minister Yury Trutnev said he sees no reason to renew the license to the Kovykta field.

"If the license isn't extended, then there is nothing for us to buy," a Gazprom spokesman said.

The Resources Ministry will finish an inspection of the field Monday.

Analysts, however, suggest the authorities are trying to put pressure on the two companies to conclude the deal faster.

"We believe that the license is unlikely to be revoked," said Lev Snykov, an analyst at VTB investment bank.

"Instead, the statement may prompt the shareholders to speed up negotiations with Gazprom, which would make it possible to move ahead with the development of one of the key gas fields in East Siberia," Snykov added.  

Copyright (c) 2008 Dow Jones & Company, Inc.

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