Have we spoken enough of the Russian government and its depressing effects on the international oil and gas industry? Apparently we haven’t, given recent events which portend further ills for all concerned parties.
Last week, Russian regulators were poised to begin discussing the withdrawal of the license held by BP’s Russian venture TNK-BP to develop massive Kovykta gas field.
One report said the long chess match over Kovykta appeared to be entering its end game when a Siberian court claimed it hadn’t the jurisdiction to hear a suit from TNK-BP challenging regulators’ claims that it was not producing enough gas from the field.
As a result, Russia’s natural resources ministry said it would “very likely” discuss whether to revoke the company’s license.
Rocket science?
What does that really mean? Well, it doesn’t take rocket science to understand that the move would create the need for a new tender for the field. Nor, given the kinds of money now being paid for natural gas, is it any surprise that a new tender would be won by Gazprom, Russia’s state-controlled natural gas monopoly.
Indeed, a number of observers see the attack on Kovykta as part of a broader move to return Russia’s oil and gas deposits to state control.
The Russian government is no stranger to such moves, nor should anyone else find them surprising. In April this year, Gazprom completed its takeover of Royal Dutch Shell PLC’s Sakhalin-2 oil and gas venture in a deal that leaves the state-controlled gas giant with one share more than a 50% stake in the project.
The Sakhalin-2 settlement came after a bruising government campaign targeting the formerly Shell-run project for alleged ecological violations on the far eastern island. Shell caved in to government pressure last November when it agreed to cede control to Gazprom for $7.45 billion.
Uncertain supplies
Under the deal, Shell is to hold a 27.5% stake in Sakhalin Energy, which runs the project, while Japan’s Mitsui and Mitsubishi will hold a 12.5% stake and a 10% stake respectively. Regardless of stakes, though, the deal left the Japanese owners-as well as their government-uncertain about the security of their gas supplies. In Europe last week, similar concerns were voiced over plans approved by the Russian government for an oil pipeline that could enable the country to bypass Belarus and tighten Moscow’s grip over much of the EU’s energy supplies.
Analysts said the new spur could eventually end shipments through the Druzhba, or Friendship, pipeline via Belarus to Poland, Hungary, Slovakia, the Czech Republic, and Germany.
Would the Russians use such a stranglehold?
“Russian diplomacy is quite strong, quite experienced, and they are trying to divide us. That’s obvious,” said Gediminas Kirkilas, prime minister of Lithuania. His experience speaks volumes: Russia has halted shipments of crude oil to Lithuania’s Butinge terminal for the past 10 months.
