Russia tightening control on natural gas

Stephen Beard May 22, 2007

Russia tightening control on natural gas

Stephen Beard May 22, 2007


KAI RYSSDAL: Vladimir Putin is tightening his grip on Russia’s energy resources, and the British oil giant BP is the latest to feel the heat from the Kremlin. The company’s been told it might lose its rights to a major natural gas field in Siberia any day now.

From the European Desk in London, Marketplace’s Stephen Beard reports.

STEPHEN BEARD: BP has been trying to develop the giant Kovykta

natural gas field in partnership with a private Russian firm. But the Kremlin-controlled company Gazprom — which owns all the pipelines in the region — is refusing to cooperate.

Now, a state-agency has warned BP that it’s not meeting production targets and could lose its licence in a matter of days.

There’s little doubt, says Russia analyst Nick Redman, that Gazprom is trying to muscle in on the Kovykta field.

NICK REDMAN: Gazprom is desperate to get its hands on as much gas as it possibly can in order to balance supply and demand, both at home and abroad. It’s very eager to have a controlling stake in that project.

Last year, Gazprom bought a controlling stake in a Russian energy project in the Pacific. Shell was the unwilling vendor. It, too, had come under pressure from the Kremlin.

The message is clear, says Peter Kemp of Petroleum Intelligence Weekly.

PETER KEMP: Russian state companies must now, as far as the Russians are concerned, be in control of the pace and scale of these developments.

Europe — which is heavily dependent on Russia’s natural gas — should be especially nervous about BP’s problems in Kovykta, says energy analyst Phillip Verlegger.

PHILLIP VERLEGGER: Russia intends to gain control of all of the natural gas production in Russia and then dramatically raise the price to Western European consumers.

The U.S. should be worried too, he says. Putin is attempting to reassert Russian dominance over a large chunk of Europe.

In London, this is Stephen Beard for Marketplace.

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