On June 22, Gazprom, BP and TNK-BP signed a memorandum of understanding. The agreement is signed to create a strategic alliance with the Russian gas giant, Gazprom, to invest jointly in major long-term energy projects or swap assets around the world.

The agreement was signed by Gazprom Deputy head Alexander Medvedev, BP Group Vice President James Dupree, President and CEO of TNK-BP Bob Dudley and Executive Director Gas Development of TNK-BP Management Viktor Vekselberg.

Under the terms of the agreement signed by all parties, TNK-BP agreed to sell Gazprom its 62.89 per cent stake in Rusia Petroleum, the company which holds the licence for the Kovykta gas field in East Siberia. It will also sell its 50 per cent interest in East Siberian Gas Company (ESGCo), the company constructing the regional gasification project.

Gazprom will pay between $700-$900 million, subject to adjustments, for TNK-BP?s interests in Rusia and ESGCo.

TNK-BP said a longer-term ?call? option for TNK-BP to buy a 25 per cent plus one share stake in Kovykta at an independently verified market price, had also been agreed with Gazprom. This option could be exercised once a significant joint investment or asset swap has been agreed under the terms of today?s memorandum of understanding.

President and CEO of TNK-BP, Bob Dudley noted: "This is an important development in the future growth of TNK-BP. We look forward to broadening our working relationships with Gazprom and BP and to further developing our Russian asset base as well as securing access to material additional opportunities for TNK-BP."

BP is one of the world?s largest energy companies. It operates across six continents and employs around 97,000 people worldwide. Its products and services are available in more than 100 countries and it explores for and produces oil and gas in 26 countries. BP has made Russia a key element of its long-term growth strategy and has conducted business there for more than 15 years.

TNK-BP is the third largest oil company in Russia. In 2006 it produced 1.9 million barrels of oil equivalent a day. It is owned and managed jointly by BP and Alfa Access Renova group.

The Kovykta gas field is located some 450 kilometers from the city of Irkutsk in the north of the Irkutsk region of Eastern Siberia. It has estimated resources of approximately 2 trillion cubic meters of gas in place.
sections: Economics