BP’S deal with Rosneft will get more Russian gas to Europe
BP HAS signed a deal with Rosneft to bring a new stream of Russian gas to European energy companies by the end of the decade.
Executives from BP and the Russian oil giant signed a memorandum of understanding in St Petersburg yesterday that could pave the way for new gas exploration and production projects in Russia.
BP’S gas trading business will also enter into a long-term supply agreement with Rosneft to bring more Russian gas to the European market from 2019.
Earlier this year BP, which owns almost a fifth of Rosneft, said it could receive supplies of between 7billion and 20billion cubic metres of gas a year from Rosneft, but only if Russian President Vladimir Putin agrees to break the hold of state-backed gas giant Gazprom.
Currently, Gazprom holds exclusive rights for pipeline gas exports for Russia. Rosneft chief executive Igor Sechin has reportedly asked Mr Putin to allow his company to export gas too. Rosneft is 50pc owned by Russia’s government.
“Co-operation with BP would provide Rosneft with both a new efficient gas monetisation channel and the conditions required for the development of a new resource base including hard to recover gas reserves,” Mr Sechin said.
David Campbell, president of BP Russia, said the deal would help the company shift its portfolio towards gas from a legacy focus on oil.
“It is important in order to meet the increasing demand for cleaner energy. Gas is a growing proportion of BP’S portfolio and by the middle of the next decade we expect around 60pc of our production to be gas, compared with around 50pc today,” he said.
Europe relies on Russian gas for a third of all supplies, and demand is increasing due to dwindling reserves in the North Sea.
The deal is the latest sign of BP deepening its long-held relationship with Rosneft. Last summer the oil major signed a deal with Rosneft to explore the oil and gas potential of Siberian fields through a new joint venture.
BP will own 49pc of the newly formed Yermak Neftegaz while Rosneft controls the majority of the venture, which intends to explore Rosneft’s
‘Co-operation with BP would provide Rosneft with a new efficient gas monetisation channel’
West Siberian and Yenisey-khatanga basins.
Mr Campbell said the deal reinforced BP’S commitment to “strategic investment” in Russia.
Separately BP reported two new offshore gas discoveries in Trinidad at its Savannah and Macadamia exploration wells yesterday. The results show potential for approximately 2trillion cubic feet of gas and development of the Savannah well will move forward later this year, it said.
BP provided an update on its existing Angelin offshore gas discovery, also in Trinidad, and said drilling was expected to begin in the third quarter of next year in order to produce first gas in early 2019.