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Gazprom Won't Use Kovykta Field, Leaving It in Limbo

VedomostiGazprom said it had no plans to tap the Kovykta gas field soon. “We don't see any demand for gas from this field at all in the foreseeable future,” a Gazprom projects chief said.

Gazprom reiterated on Monday that it had no plans to tap the giant Kovykta field any time soon, leaving the future of the valuable asset, part-owned by BP, on tenterhooks.

BP's 50-50 venture with Russian billionaires, TNK-BP, agreed to sell the field to Gazprom in 2007 in a deal that collapsed later in the midst of a shareholder feud in the joint company.

The government has recently renewed threats that it would strip TNK-BP of the rights to develop Kovykta — ruining its investment of nearly $1 billion — because the company has been unable to produce as much gas as the license requires. Lower output has been a consequence of a nationwide ban on independent gas exports, which made Gazprom a monopoly for foreign trade of the commodity.

“We don't see any demand for gas from this field at all in the foreseeable future, both for sales in that region and export deliveries,” Gazprom's eastern projects chief Viktor Timoshilov said at a news conference.

TNK-BP, which controls Kovykta through a majority stake in license holder Rusia Petroleum, said last week that Rusia Petroleum had filed for bankruptcy because it couldn't repay loans borrowed from TNK-BP to develop the field. A court may well order the sale of Kovykta's license as a way to compensate TNK-BP.

With 2 trillion cubic meters of gas under the ground, Kovykta qualifies as a strategic asset under a 2008 law, meaning that only a state-controlled company such as Gazprom could bid for the field. State asset holding company Rosneftegaz has also been named as a potential bidder.

Should the government take the license away, it could hand it over to Gazprom free of charge. Gazprom had said earlier that it wasn't going to develop Kovykta until 2017, if the company assumes ownership. Kovykta lies close to China to the south, but analysts agree that sales there are a very distant prospect because of disagreements over the price.

Gazprom, which received the license for developing the similarly large Chayandinskoye field in Russia's far north last year, said it wouldn't depend on Kovykta to supply China.

“We don't have the problem of resource base in the region,” Timoshilov said Monday.

Suffering a dip in sales, Gazprom has recently demonstrated much more dedication to its pipeline-building ambitions than it did to investing in new fields.

It announced Monday that its 50-50 joint venture with Greece's Hellenic Gas Transmission System Operator, or DESFA, will soon apply for formal incorporation in Greece to design, fund, construct and operate the stretch of the South Stream line in that country. The pipeline will carry gas from Russia under the Black Sea to southern Europe, circumventing Ukraine.

Also on Monday, Gazprom denied plans to replace its deputy chief in charge of exports, Alexander Medvedev, Bloomberg reported. Gazprom chief Alexei Miller ruled out the possibility in e-mailed comments after Kommersant reported that the company might remove Medvedev in an effort to change its export policy that led it to charge much higher prices in Europe than its competition.

See also:

TNK-BP Unit to Be Bankrupted

TNK-BP Unit to Be Bankrupted

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