TNK-BP and BP to contribute $ 1.5-bn assets to venture with Gazprom

Jun 25, 2007 02:00 AM

Having lost Kovykta under agreement with Gazprom, TNK-BP and BP have won the access to other assets of monopoly. The parties will create a venture worth roughly $ 3 bn, it is known already, though the actual size of their contributions is yet unclear.
TNK-BP stands ready to share with monopoly its last gas asset, Rospan, that operates in Urengoi fields, and Gazprom will probably provide the stakes in Achimgaz and Arktikgaz. According to analysts, TNK-BP will materialize Rospan potential only in partnership with Gazprom.

Gazprom, BP and TNK-BP sealed a cooperation agreement, whereby Russia’s gas monopoly will buy out from TNK-BP 62.89 % in Rusia Petroleum for $ 700 mm to $ 800 mm. Rusia Petroleum is the license holder for Kovykta gas condensate field and has 50 % in Vostochno-Sibirskaya Gazovaya Kompania (VSGK -- East Siberian Gas Company), which is gasifying the Irkutsk region.
Under the counter option mentioned in the agreement, the parties will set up a $ 3-bn venture during a year.

“We don’t restrict geography. Both Russia’s assets of TNK-BP and BP’s foreign assets could be contributed to certain ventures,” explained Viktor Vekselberg, who co-owns TNK-BP. “We are ready to establish the asset list. A special committee will analyze proposals of all parties in the near term.”
According to BP Vice President James Dupree, today’s must is to open markets to Gazprom under cooperation agreement. At the same time, the agreement will enable BP to step up investments in Russia, Mr Dupree emphasized.

Gazprom is targeted at long-term contracts for selling natural and liquefied gas, at stakes in underground storage facilities and at energy assets of the British company, a source with the company said on condition of anonymity. It will be the power plants in Britain and Spain, the source specified.
The agreement with TNK-BP provides for the company’s optional return to Kovykta, as a minor holder of a blocking stake. But Kovykta is by far not the sole choice for being contributed to the venture, said Gazprom's Deputy Chief Executive Alexander Medvedev.
“The project has been launched not to sit on the assets as a dog in the manger, we will be creating an international alliance,” Medvedev pointed out.

TNK-BP has already determined what it wants from monopoly. The company is willing to contribute to the venture with Gazprom its last gas asset, Rospan International that operates in Yuzhno Urengoi and Vostochno Urengoi fields with the aggregate reserves of 950 bn cm.
“We have agreed that Rospan could be contributed to the venture from our party,” Viktor Vekselberg said. In return, TNK-BP expects Gazprom to provide assets of companies operating in that region.

A year ago, Mr Vekselberg already suggested creating a consortium of three companies licensed to develop the Urengoi fields -- Rospan, Arktikgaz (owned by ENI Neftegaz, while Gazprom has two-year option for buying out over 51 %) and Achimgaz (venture of Gazprom and German Wintershall). That trio has the following shares in the Urengoi fields: Achimgaz -- 50 %, Arktikgaz and Rospan -- 25 % each.
The prospects of Rospan are very good despite the production decline from 2.7 bn cm in 2006 to 1.5 bn cm in 2007, said TNK-BP Vice President Sergey Brezitsky. Rospan is capable of surging annual production to 10 bn cm should the respective investments in infrastructure be made, the top manager predicted, confirming the need to create infrastructure along with other companies operating in those fields.

As to the industry’s analysts, they are far from unanimous about the attractiveness of such venture to Gazprom. Troika Dialog analyst Valery Nesterov, for instance, views this idea quite logical, evaluating the market worth of Rospan between $ 2.5 bn and $ 3 bn and emphasizing that “the field is being developed already and has excellent potential.”
“Once the issue of access to the unified system of gas supplies is solved, the production may go up several fold, which will be profitable to Gazprom as well,” Nesterov speculates.

But BCS analyst Maxim Shein isn’t equally optimistic.
Shein evaluates Rospan worth at $ 3.5 bn to $ 4 bn and says that Gazprom doesn’t have to contribute Arktikgaz and Achimgaz to the venture with TNK-BP, as foreign partners with progressive technology and desire to work are represented in the neighbouring block already.

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