Gazprom: Doesn't See Demand in TNK-BP's Kovykta Field

MOSCOW (Dow Jones Newswires), June 7, 2010

Russian gas firm Gazprom said Monday it has no near-term plans to develop a huge Siberian gas field, which BP's Russian joint venture aims to sell to a state company this year.

As talks to sell the controversial Kovykta gas condensate project to a state company drag out, TNK-BP--a joint venture between U.K. oil major BP and a group of Russian businessmen--said last week that the company operating the Siberian field has filed for bankruptcy.

State-controlled Gazprom agreed in 2007 to buy the license for Kovykta--one of the biggest undeveloped gas fields in the world--from TNK-BP, but the deal never materialized.

Meanwhile, the Russian government has repeatedly threatened TNK-BP that it could withdraw the license without compensation, as regulators said it wasn't meeting production targets.

Analysts said last week's move to bankrupt Rusia Petroleum, the Kovykta field operator and license holder, could pave the way for the sale, as it increases pressure on the government to decide the field's fate.

TNK-BP says it is still in talks with Gazprom, but Monday the gas giant said it has no immediate plans to develop the field.

"As far as the long-term gas balance on both domestic and export markets, we don't see how gas from this field can be in demand in the foreseeable future," said Viktor Timoshilov, head of Gazprom's projects in the Far East.

Kovykta is strategically important for Russia, as it plans to export gas from the field to China and other Southeast Asian countries. TNK-BP originally planned to send Kovykta's gas to Asia, but those plans were hampered when Gazprom became Russia's monopolist gas exporter.

Gazprom's decade-long plan to build a gas pipeline to China has yet to materialize, due to disagreements over pricing.

TNK-BP, Russia's third-largest oil producer, has said it invested $664 million developing Kovykta, which contains approximately 2 trillion cubic meters of gas reserves.

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