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PUTIN TURNS SCREW ON BP IN GAS ROW

Tuesday June 5,2007

By Andrew Johnson, Associate City Editor

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Russian president Vladimir Putin has savaged BP, saying his government has lost patience over the $20billion (£10billion) Kovykta gas field.

Analysts said his comments appeared designed to pile pressure on BP and its partners to sell a controlling stake in their joint venture, TNK-BP, to one of two state-owned firms, Gazprom or Rosneft.

Putin said TNK-BP had not done enough to meet its obligations under the licence granted to run the massive field, one of the world’s biggest.

“I would like to stress that the field has reserves of 3trillion cubic metres,” said Putin in an interview. “To understand its importance for our country, it is equal to almost all the reserves of Canada.

“But if the members of the consortium are doing nothing to meet their licence obligations, how much longer do we have to tolerate this?”

Last Friday the Russian resources ministry delayed by two weeks a decision on whether to strip TNK-BP of its licence.

Analysts said the delay was designed to avoid any difficulties at the G8 summit of the world’s most powerful nations, which started in Germany yesterday, and at a showcase economic forum in St Petersburg next week.

TNK-BP is still expected to lose the licence when the final decision is made.

Under the terms of its licence, TNK-BP was expected to produce 9billion cubic metres a year.

However, to justify that level of production, it said it needed to export gas to China. The Russian government has withheld permission for exports, so TNK-BP has only been producing enough to meet local demand — about 2.5billion cubic metres a year.

Putin said this was a poor excuse. “We can talk about many issues here,” he said, “But TNK-BP knew about them when they bid for the licence. They knew about these problems and possible restrictions and nevertheless bought the licence.”

The protracted battle over Kovykta is seen as part of moves by the Kremlin to regain control of strategically important energy assets sold into private hands.

BP, led by Tony Hayward, declined to comment on the latest developments. Its shares rose 3p to 570dp.