Putin: BP-led consortium ‘doing nothing’ to meet Russia’s terms at Siberian field

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?”

BP’s Russian joint venture TNK-BP is the main shareholder in the company developing the field, which has been unable to reach an agreement with natural gas monopoly OAO Gazprom over exports from Kovykta to China. As such, its current production is far lower than the 9 billion cubic meters per year stipulated in the original agreement, though TNK-BP argues that it has not violated the license terms since it is meeting local demand.

Putin dismissed arguments about Gazprom, however.

“One can talk about many reasons, including access to the pipeline system. But they knew about this when they went after the license. They knew about these problems and the possible limitations. Nonetheless ... they bought the license,” Putin said.

Alastair Ferguson, the director of TNK-BP’s gas operations, declined to comment on the question of the license at a joint news conference with the World Wildlife Fund on possible pipeline routes from the field.

Analysts expect the license to the field to either be revoked, or for an agreement to be reached with Gazprom that sees it take control of the development.

The latter scenario would be more favorable they say, and would mirror Gazprom’s recent entry to Royal Dutch Shell PLC’s Sakhalin-2 liquefied natural gas project off Russia’s Pacific Coast. Gazprom reached an agreement to take control of the project in December, after a high-profile probe by Russia’s ecology watchdog uncovered numerous violations.

Industry watchers suggested that the campaign was aimed at forcing Shell to let Gazprom in, and was in line with the state’s growing role in the energy industry. More than 40 percent of Russia’s oil output is in the hands of state-controlled companies.

— Alex Nicholson, AP writer