BP will not join Nord Stream

AAR has blocked the partnership of BP and Gazprom.
BP still hopes to become a strategic partner of Gazprom. After the failure with Rosneft at the shelf BP has tried to join the project of Gazprom on the construction of a new branch of the Nord Stream gas pipeline. However, this time the plans of BP have again been broken by the Russian owners of TNK-BP. They didn’t allow BP to participate in the Nord Stream by passing the shareholders agreement of TNK-BP. BP didn’t want to follow the approved procedure, i.e. to offer the Russian oil company to join the project.
On Friday the meeting of Gazprom’s shareholders took place. On the results the head of Gazprom, A. Miller, said that the company considers the possibility of the construction of the new branch of the Nord Stream gas pipeline (that goes by the bottom of the Baltic Sea from Russia to Germany) to Great Britain and BP could participate in the project. According to Mr. Miller, the company would like to receive gas by the Nord Stream but it is not about the negotiations with the British party but simply about its interest. The head of Gazprom said that there are signs of BP’s interest at the corporate and Governmental levels. A. Miller didn’t say in which form BP could join the project but said that it is about the participation in the construction of the 4th branch to Great Britain but not the current configuration of the Nord Stream pipeline. 
There are 2 branches of the Nord Stream now with the pumping capacity of 58 bln cubic meters of gas a year. Besides Gazprom the shareholders of Nord Stream AG are the consumers of its gas in Europe: Wintershall and E.ON Rurhgas, Gasunie and GDF SUEZ.
According to the sources of Kommersant in Gazprom, there haven’t been held any certain negotiations with BP by the Nord Stream as there is nothing to discuss in fact – it is not clear whether there will be a demand for gas from the 2 additional branches of the Nord Stream. The project is at the stage of pre-FEED and it is useless speaking about serious discussions with BP before the investment decision is made. They don’t say when and why BP showed interest in the Nord Stream but add that it hasn’t formed any certain offers upon its stake in the project. It is known that A. Miller met with the head of BP, R. Dudley, in late April and then both of them met with the President, V. Putin, and the heads of the energy companies at the forum in Saint-Petersburg.
Nevertheless, on June 26th BP officially asked the permission from AAR, consortium of the Russian shareholders of BP, to participate in the Nord Stream project. According to the provision on the exclusiveness, BP can participate in the oil and gas projects on the territory of the Ukraine and Russia only via TNK-BP. In 2011 this provision was the reason of the failure of the deal between BP and Rosneft. In its request BP says that it considers the possibility of the participation in the Nord Stream 3 project, the technical and economic assessment of which is being worked out, and in this connection it might decide to somehow participate in the Nord Stream 1 and 2 and/or take on the obligations to participate at the future stages. BP suggests quickly and effectively settling the situation if the parties of the agreement (shareholders of TNK-BP) are not interested in this project and reminds that AAR has already not interfered in the joint project of BP and the “Skolkovo” fund on raising the energy efficiency. BP asked for an answer by July 20th.
But they answered the next day. The head of AAR, S. Polovets, suggests BP acting in conformity with the obligations in the framework of the shareholder agreement, i.e. suggesting the Board of Directors of TNK-BP considering the possibility of the company’s participation in the Nord Stream. BP wasn’t satisfied with such a variant: the company said it has turned away from the negotiations on the Nord Stream. On the background of your refusal… we are not going to take any actions in respect of the above stated potential possibilities (concerning Russia) to avoid the risk of doing harm to BP or unintended violation of our obligations by the shareholders agreement, is said in the official answer of BP.
S. Polovets said that the Russian shareholders are extremely disappointed by the fact that BP has decided to turn away from the project instead of giving TNK-BP the opportunity to participate in it. According to the head of AAR, the Nord Stream could bring TNK-BP a significant profit and is of strategic importance for Russia. The ultimate position of BP “either us or nobody else” states the necessity of core changes in the relationships between the shareholders of TNK-BP as well as shows the disregard the company treats the strategic interests of Russia with, S. Polovets said. The representatives of BP told Kommersant that the company executes the shareholders agreement and considers various possibilities of running its business.
A source of Kommersant close to BP says that the company has been considering the possibility of participation in the Nord Stream for the last half a year. There are plans on the construction of one of the branches to Great Britain. BP is a key player of this market, the company has a political resources and the participation in such a project is quite logical, an interlocutor of Kommersant says. According to them, there haven’t been any certain negotiations, only a light discussion, and BP has decided to alert AAR to reassure it. No matter how the situation with TNK-BP develops, Russia is an important market for BP and the latter will try to be present in it.
UBS’ K. Cherepanov thinks that BP needs the participation in the Nord Stream to gain the status of Gazprom’s partner and have its support on the background of the conflict with AAR. There is not much economic profit in such a partnership, IFD Capital’s V. Kryukov agrees, it is first of all political. Despite of the break up with Rosneft, BP is interested in the Russian shelf and is looking for a new partner for it. On the background of the sad experience of Rosneft Gazprom won’t allow BP enter in the Nord Stream before the full settlement of the conflict with AAR.

http://www.kommersant.ru/doc/1971822
Translated by Galiya Musabekova
 

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