Gazprom ascendant

The world's private energy companies can this week have no illusions about the risks of doing business in Russia as they ponder the fate of one of BP's major global investments, the Kovykta gas field, which it operates through a Russian joint venture, TNK-BP. As was the case with Shell's Sakhalin-2 project, BP's operations in Kovykta are unacceptable to state-owned Gazprom, which the Kremlin has decided is to exercise a monopoly over gas exports to Asia as it does to Europe.

To this end, the Kremlin decided some time ago to strip TNK-BP of its licence to develop the natural gas field in Siberia, which is within pipeline range of hungry markets in China. Its grounds for doing so - that the joint venture has failed to develop the field quickly enough - are strong enough to withstand scrutiny in any Russian court. TNK-BP's claims that domestic demand does not warrant such rapid development of supply have been refuted. Thus, only the details of the joint venture's demise remain to be negotiated, and this boils down to agreeing a price for the sale of TNK-BP's stake in Kovykta to Gazprom.