BP, Gazprom Talk Creating Joint Venture

Russia's Gazprom has discussed forming a joint venture with BP that could work with liquefied natural gas, the state gas monopoly said in a statement Thursday.

BP's outgoing Chief Executive John Browne met with Gazprom CEO Alexei Miller at the company's Moscow headquarters on Thursday, the statement said. Browne was accompanied by Tony Hayward, current head of exploration and production at BP, who is set to succeed Browne.

"In particular the creation of a joint venture for developing the international business of the companies, including LNG (liquefied natural gas), was discussed," the statement said.

No further details of the possible agreement were provided. Spokesmen for Gazprom were not immediately available to comment.

BP spokesman Toby Odone declined to provide any further details of the talks, which he called "preliminary discussions."

Gazprom produces no LNG of its own at present, though it agreed to buy a controlling interest in Royal Dutch Shell'sSakhalin-2 oil and LNG project in December last year in a controversial deal that observers say came after intense regulatory pressure on the company. Based on the Far Eastern island of Sakhalin, the project is due to deliver its first LNG in 2008.

Separately, BP is in talks to reach an agreement with Gazprom over its massive Siberian Kovykta gas field, which it operates via a subsidiary of its local joint venture, TNK-BP.

TNK-BP has come under pressure from prosecutors and environmental agencies to produce more gas from the field otherwise it may be found in violation of its license to develop the site. BP contends that there is insufficient local appetite for any more gas.

TNK-BP needs Gazprom's permission to export gas from Kovykta to lucrative Asian markets and analysts expect to see a similar deal to the one with Shell that will give Gazprom control of the field.