From Russia, but with how much love?
Who would be TNK-BP president Robert Dudley right now? Over the last few weeks the long running feud between the Anglo and Russian elements of the company has descended into all-out war, leading to Dudley being questioned by the authorities, fined and the Labour Inspectorate threatening to oust him from the job.
Whether the current commotion is a contrived build up to the ultimate ousting of the Russian party from the venture or simply a side show is the subject of great debate. “I wish I knew”, was the succinct response of an industry expert when asked what is really going on.
The most recent facts in the saga are thus: the TNK-BP office receives an unplanned inspection (or raid depending on how you look at it) on June 11, during which the authorities identify several employment violations. The company is fined 40,000 roubles ($1,696) and Dudley himself a paltry 3,000 roubles.
“If the company sorts out its issues by early July, there will be no more questions,” Mikhail Malyuga, deputy of inspections at the federal labour inspectorate was quoted saying. For its part, a TNK-BP spokesman has promised to fulfil “all that is required of the inspectors and eliminate any violations”.
But that’s unlikely to be the end of the matter. The Russian Alfa-Access-Renova (AAR) consortium, which owns 50% of the company, is threatening to sue BP at the International Arbitration Court in Stockholm and through a separate suit in Moscow because BP has rejected its demands for more executive control.
AAR has been calling for Dudley’s resignation, accusing him of acting only in the interests of BP. BP has refused and in return AAR won’t sign off on TNK-BP’s accounts.
The stand-off threatens to paralyse the company’s operations and as one source told Gas Matters “it needs and I believe will come to a head soon”. Enter Gazprom. It’s the most likely buyer of the Russian stake in TNK-BP, or even, possibly, a majority stake in the company in line with new legislation limiting foreign ownership of strategic sectors.
Whether it will pay up to $60 billion (the figure quoted by AAR) is another matter. Many believe AAR’s legal threats are designed to strengthen their bargaining position with potential buyers. One industry observer told Gas Matters: “I think the TNK guys know they will lose the stake to Gazprom, so they are blowing a lot of smoke. It’s my interpretation that AAR - who are after all, a bunch of 1990s oligarchs - have been told to sell their stake by the Russian government. They aren’t happy so they are trying to raise the price or keep their holding by accusing BP.
“This will be one of the first big tests for the new Russian president, Dimitry Medvedev. Is he going to let the 1990s oligarchs prevail? It’s also a fundamental question of who you want in control of one of your largest energy companies. Since Khodorkovsky, the government hasn’t had to press the oligarchs too hard to get what it wanted, for instnace Abramovitch’s sale of Sibneft to Gazprom. If AAR does eventually sell its TNK-BP stake, it will make a huge profit, but not as huge as it aspires to.”
Despite the complexities, Russia is still the destination of choice for many in the energy industry. “Moscow is in the driving seat - western energy firms need it more than it needs them,” says our source. “And don’t forget, in commercial terms the TNK deal has been wonderful for BP. In my opinion it would never willingly walk away. There are plenty of companies waiting for the chance to do business in Russia.”
One foreign company already active in the country is Shell. Just weeks ago, it agreed to establish a working group on participation in Gazprom’s proposed Tambey LNG plant on the Yamal Peninsula in north west Siberia. Gazprom told us there is “no concrete commitment as yet, as to the timeframe or the plant’s capacity” but Gazprom’s Yamal reserves exceed 10 Tcm.
The most recent development is a report in the Russian press that Gazprom has strengthened its hold on gas reserves in the area by buying the 1.2 Tcm South Tambey gas field from Tambeyneftegaz. (The government awarded it equity in the field without a tender). But that still leaves unresolved the question of who - from Shell, Repsol YPF, Anadarko Petroleum and Gazprom - may be involved in a Yamal LNG development.
Just a week after the Shell deal was inked, Gazprom dropped plans (on the other side of the peninsula) for Kharasevey LNG, citing too challenging geological and weather conditions. But this may not affect Tambey, where conditions are different. Ultimately Gazprom has a legal monopoly on gas exports and may not be in a hurry to develop this projecr, given its Sakhalin 2 and Shtokman priorities.
A Shell spokeswoman told Gas Matters that it had also discussed the progress of Sakhalin 2 with Gazprom. With $5.3 billion investment secured from Japanese and international banks to fund the final stages of construction, deliveries expected to begin in early 2009 and more than 90% of the 9.6 mtpa already linked to long term contracts, that must have been an altogether happier conversation.
Shell might still be smarting from the circumstances under which Gazprom obtained a majority stake in Sakhalin 2 last year, but the UK firm still holds a 27.5% share in the project - a pretty large slice of a very big pie. And that’s the appeal of Russia.