TNK-BP, BP's Russian oil venture, has said it aims to sell its vast Kovykta gas field to Rosneftegaz, RussiaÔÇÖs state holding company, by the end of the year.
It is thought that UK-based BP will achieve a price of between $700 million and $900 million (Ôé¼521 million and Ôé¼670 million) for the east Siberian gas field, the development of which has been in limbo for years.
Rosneftegaz is the majority shareholder in Rosneft, Russia's largest oil producer, and also owns a stake of just over 10 per cent in Gazprom, the worldÔÇÖs largest gas company.
The Kovytka field has gas reserves of two trillion cubic metresÔÇöenough gas to meet world demand for eight monthsÔÇöand is also strategically located to supply China.
TNK-BP had originally planned to spend $20 billion on the field, but argued production couldnÔÇÖt get off the ground due to state-owned GazpromÔÇÖs monopoly on exports to nearby China. To reach the Asian markets, TNK-BP would have needed to build pipelines costing billions of dollars.
The joint venture then came under official pressure to sell the field in 2007 after failing to meet production targets, so it agreed to sell Kovytka to Gazprom; however, the talks were delayed due to disagreements over price. Since then, Gazprom has declared it is no longer interested in the field.
Russian officials have long argued that TNK-BP be stripped of its operating licence, for failing to meet its terms. Should this happen, Gazprom could theoretically snap up the deposit free of charge, since Kovykta's huge reserves place it in the strategic category.
Licensing policy is governed by Rosnedra, a separate body, which to date has made no comment on the dispute.
TNK-BP, which owns 62.9 per cent of the project, said it has already invested $664 million (approximately Ôé¼494 million) in developing Kovykta. Russia's deputy prime minister Igor Sechin said earlier this month that TNK-BP should be compensated for the development costs it has incurred.
The deal with Rosneftegaz, if it goes ahead, could be finalised by later this year.
Investor confidence at TNK-BP has been running low ever since the production dispute took hold, as the Kremlin is seen as having a tendency to expropriate assets from private businesses.
However, Sechin assured the market that this would not be the case with Kovykta.
