From the AP wire correspondent Alex Nicholson, courtesy of Petroleum News:
Russian President Vladimir Putin expressed exasperation with BP PLC’s Russian joint venture, which he said was underproducing at a giant Siberian oil field.
In an interview text released June 4 by the Kremlin, Putin said it was unclear whether the license for the giant Kovykta gas field would be revoked, but stressed that patience was running thin over its pace of development.
“I would like to point out that the field has reserves of about 3 trillion cubic meters,” Putin said. “It is equal to almost all of Canada’s reserves. But if the participants of this consortium are doing nothing to meet the license terms, then how long must we put up with this?”
It took Alaska 24 years of exasperation with ExxonMobil (along with field partners BP, Chevron, and ConocoPhillips) over the lack of development on the Point Thompson leases before the state revoked the leases last year. The answer, Mr. Putin, is that BP wants you to put up with their warehousing of your gas for as long as they can get away with it. It’s a basic rule of vertically-integrated monopolies – restrict supply in order to maximize profit. The major oil companies do it by sitting on oil and gas leases without developing them, and also by restricting refining capacity.
Update (22 June 2007):
From the BBC: BP has sold its stake in the Kovykta gas field development to the Russian state-controlled firm Gazprom for between $700m-$900m. The BBC report indicates that this is a fraction of what BP interest was worth, and that it is another example of the Kremlin forcing out western energy firms. The Kovykta gas field is anticipated to have sufficient gas reserves to supply all of Asia for up to five years.
“The sale comes after Russian authorities had put increasing pressure on TNK-BP, saying the firm was not producing enough gas from the Kovykta field.
Russian officials claimed that under the terms of its licence, Kovykta should have been producing nine billion cubic metres of gas per year by 2006, rather than the less than 2.5 billion cubic metres actually being processed.
NK-BP said that it could not produce any more because the local region did not require additional supplies and it had been denied an export licence.
Similar pressure was put on Anglo-Dutch energy group Shell last year, before it sold Gazprom its majority stake in the Sakhalin-2 oil and gas project off Russia’s Pacific coast.
Shell sold its interests in Sakhalin-2 after Russian authorities continually refused to grant it the necessary environmental certificates.”