BP and TNK-BP sign MoU to create strategic alliance with Gazprom

BP and TNK-BP have signed a Memorandum of Understanding (MoU) 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 bn, 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 % stake in Rusia Petroleum, the company that holds the license for the Kovykta gas field in East Siberia. It will also sell its 50 % interest in East Siberian Gas Company (ESGCo), the company constructing the regional gasification project.

Gazprom will pay between $ 700-$ 900 mm, 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- % 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 the 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."