BP Sells Kovykta Stake, Enters Pact with Gazprom

BP and TNK-BP have signed a memorandum of understanding to create a strategic alliance with Gazprom to invest jointly in major long-term energy projects or swap assets around the world.

In a move designed to extend Gazprom's access to international markets and deepen BP and TNK-BP involvement in Russian oil and gas, the companies will establish a joint team to identify strategic opportunities for investment both overseas and inside Russia.

"We will initially be looking for projects of at least $3 billion, but the potential for further growth could be very significant," said BP chief executive Tony Hayward. "This historic agreement lays the ground for powerful co-operation between BP, TNK-BP and Gazprom."

Dr Hayward said the companies would immediately set up a joint steering group to look for suitable investment options "across all geographies."

"Our firm aim is to establish a venture that is strategic and long term, with mutual benefits for the companies, both inside and outside Russia."

Under the terms of the agreement signed by all parties, TNK-BP agreed to sell Gazprom its 62.89 percent stake in Rusia Petroleum, the company that holds the license for the Kovykta gas field in East Siberia. It will also sell its 50 percent interest in East Siberian Gas Company (ESGCo), the company constructing the regional gasification project.

Gazprom will pay between $700-$900 million, subject to adjustments, for TNK-BP's interests in Rusia and ESGCo.

TNK-BP said a longer-term "call" option for TNK-BP to buy a 25-percent plus one share stake in Kovykta at an independently verified market price, had also been agreed with Gazprom. This option could be exercised once a significant joint investment or asset swap has been agreed under the terms of today's memorandum of understanding.

President and CEO of TNK-BP, Bob Dudley noted: "This is an important development in the future growth of TNK-BP. We look forward to broadening our working relationships with Gazprom and BP and to further developing our Russian asset base as well as securing access to material additional opportunities for TNK-BP."