Russian
Bear targets T&T's LNG plant
By Raffique Shah
Trinidad Express
Port Spain
Petroleumworldtt.com
09 09 07
LOCAL bpTT officials have strenuously denied it.
BP international spokesmen have skirted the issue.
But it is difficult to dismiss numerous reports
in authoritative publications that suggest BP will
offer Russia's Gazprom, the world's biggest natural
gas company, part of its 38 per cent stakes in
Trinidad's Atlantic LNG.
Speculation is that Gazprom, which controls 25
per cent of gas piped to Western Europe, an even
higher percentage of gas that fuels East European
countries, and a significant portion of Japan's
huge gas imports, wants to get a toehold in the
US market. And it sees Atlantic LNG, which supplies
65 per cent of the US liquefied natural gas requirements,
as the perfect vehicle.
The story has its genesis in a duel between state-owned
Gazprom and the TNK-BP consortium that spent billions
of dollars developing a productive gas field in
Kovykta, East Siberia. Because the field promises
to be a lucrative one, TNK-BP resisted Gazprom's
threat to revoke the consortium's license.
On June 22, the two parties signed a memorandum
of understanding with Gazprom and agreed to sell
their 63 per cent interest in the Kovykta field
for US$900 million.
BP indicated it would also sell its 50 per cent
interest in East Siberian Gas Co, a company constructing
a regional gasification project.
Later,
reports in Russia's Novosti press, as well as
in Forbes magazine, Business Week, the Times
of London, PricewaterhouseCoopers and several other
reputable publications, stated that BP was ready
to set up a joint venture with Gazprom and, as
quoted from Novosti: "...contribute its stake
in an LNG plant in Trinidad and Tobago. If the
deal is signed, Gazprom may become one of the largest
LNG suppliers to the United States."
It
quoted a Gazprom spokesman as confirming the
report. And Valery Nesterov of Troika Dialog
investment
company said: "BP's shares in ALNG are highly
liquid assets with a profitable market. He added
that in 2006 the US imported 16.25 billion cubic
metres (bcm) of LNG, of which 10.85bcm came from
Atlantic LNG.
Forbes
magazine (August 23rd) alluded to the transactions
between BP and Gazprom. It said (inter alia): "After
the Kremlin allowed BP the option of acquiring
a minority stake in the coveted Kovykta gas fields,
the two companies announced a US$3 billion global
venture, though they did not provide specifics.
The article continued: "Therefore BP's Kovykta
deal is quite an achievement and one it will have
to repay in kind. And what could be better than
giving Gazprom access to the lucrative US market?
The Caribbean country of Trinidad and Tobago is
the biggest supplier of liquefied natural gas to
the US, supplying 65.5 per cent of the 16.56bcm
that are consumed by the country every year. Though
Gazprom has been making steady inroads into Europe,
sparking concerns that the continent could become
too dependent on Russia for its energy supplies,
it has had no opportunities until now in the US"
Forbes
continued: "A spokesman for BP said
the company was in 'ongoing discussions with Gazprom'
as part of the deal reached over Kovykta. 'We said
then that we would discuss cooperation on future
developments and would be looking at everything
we have in our portfolio.' He said that the company
would not comment on the current rumours, adding
that BP 'had ruled nothing in and nothing out.'"
Meanwhile,
bpTT's Media and Communications Advisor, Luis
Araujo, told Business Express: "There
have been reports circulating in the international
media about Gazprom and BP's interests in Trinidad.
This unconfirmed article with information attributed
to an unnamed source was first reported in the
Vedomosti newspaper in Moscow. BP considers the
story to be pure speculation and, as such, does
not comment on speculation or rumours."
And
Energy Minister Dr Lenny Saith, who indicated
he'd had no information on any such "deal" from
BP, said the company would first have to seek leave
from government. "In the energy sector, even
major shareholders must seek leave from government
for any of their shares to be transferred to another
company. Government must approve such transaction." He
proffered: "But I don't see why Gazprom would
want to come here to get a toehold on the US LNG
market. It's the biggest company in the world,
and it has massive operations off Russia's east
coast, which is close to America's west coast.
It can simply use gas from those fields to break
into the US market."
But
BP's CEO Tony Hayward told a UK newspaper of
the company's joint venture with Gazprom: "We
will initially be looking for projects of at least
$3 billion, but the potential for further growth
could be very significant. This historic agreement
lays the ground for powerful co-operation between
BP, TNK-BP and Gazprom." Dr Hayward said the
companies would immediately set up a joint steering
group to look for suitable investment options "across
all geographies."
"Our
firm aim is to establish a venture that is strategic
and long term, with mutual benefits
for the companies, both inside and outside Russia."
The BP-Gazprom joint venture agreement was signed
at a Kremlin ceremony overseen by First Deputy
Prime Minister and Gazprom chairman Dmitry Medvedev,
who is a leading contender to succeed President
Vladimir Putin. Putin has stepped up the drive
to bring oil and gas reserves back into the folds
of the state as his presidential term approaches
its end (March 2008). There must be political ramifications
to any sale of BP shares in Atlantic LNG to Gazprom,
especially since relations between Washington and
Moscow have cooled considerably after President
Bush announced a decision to deploy a missile defence
system in Poland and several other countries close
to Russia's border.
What
remains in question is whether or not BP will
go ahead and shed some of its shares to Gazprom,
and if the Trinidad and Tobago Government would
approve of it. Cash-laden Gazprom may be eyeing
Atlantic LNG not simply to continue supplying the
latter's current end-product to the USA, but with
a view to expanding production significantly. Recently,
Prime Minister Patrick Manning announced that "Train
X", an addition to ALNG's four trains, will
not be built at this time. This came even before
the Ryder Scott report pointed to limited gas reserves
in this country. Gazprom, if it does get a slice
of ALNG, will more than likely look to Venezuela
for gas supplies to the Point Fortin-based plant
to boost production, hence supply to the USA. Presidents
Putin and Hugo Chavez share warm relations.
Russia
has, by far, the biggest gas reserves in the
world-6,112tcf, followed way behind by Iran
(971tcf) and Qatar (911tcf). With Gazprom controlling
almost all of that country's gas fields, installations,
ports and related facilities, it is the biggest
gas entity in the world. But expanding into LNG
production and distribution is becoming increasingly
expensive. Plant-costs have gone up by over 50
per cent within recent times, and specialised ships
needed to transport the -161 degrees Celsius cargoes
have doubled in cost. Recently, Qatar, the second
biggest LNG producer and exporter in the world
(after Indonesia), acquired 30 such vessels. This
would ensure Qatar's capability to deliver its
ever-increasing volumes of LNG to the biggest importer
in the world, Japan, and the "new giants on
the block", China and India.
Trinidad
and Tobago will soon encounter some competition
on the US market as Peru and Bolivia move to establish
LNG plants and terminals. The USA has five LNG
import facilities (re-gasification terminals) in
operation and three more are currently under construction
in the Gulf of Mexico. The USA's current import-capacity
stands at 1.6 trillion cubic feet per year. A PwC
2007 report on the future of LNG states: "Trade
in natural gas has outpaced overall natural gas
trade. It is predicted to rise to 37 to 38 per
cent of all natural gas crossing national borders
by 2020.
If
the BP-Gazprom deal with the former's ALNG shares
comes to pass, it would signal a new meaning
to "globalisation". It would also signal
the first foray into this part of the world by "the
Russian bear". Is Trinidad and Tobago ready
to embrace the "bear" - or be embraced
by it? We should soon find out.
Trinidad
Express
Wednesday, September 12th 2007
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©2007 Trinidad Express. All Rights Reserved.
