BP Offers Gazprom Trinidad LNG for Global Venture

BP has offered to contribute part of its liquefied natural gas business in Trinidad and Tobago to its global venture with Russian gas monopoly Gazprom, a newspaper reported on Thursday.

Vedomosti business daily quoted sources close to British energy company BP's Russian vehicle TNK-BP as saying BP had also made a few other contribution proposals, which the sources declined to disclose.

Gazprom, the world's largest gas producer, already supplies a quarter of Europe's gas needs, but wants to expand into the fast growing U.S. LNG market.

Analysts said it would be interested in becoming BP's partner in Trinidad's LNG as the Caribbean country was one of the biggest suppliers of the United States.

"Participation in this project will enable Gazprom to expand its presence on the LNG markets, which is one of the priorities for the company," analysts at UBS brokerage said in a note.

Both Gazprom and BP declined to comment on the report on Thursday.

Gazprom, BP and TNK-BP agreed to set up a global venture earlier this year following Gazprom's acquisition of the giant East Siberian Kovykta field from TNK-BP.

TNK-BP wanted to use Kovykta for an ambitious project of gas supplies to China, but Gazprom lobbied the Russian government to block the plan as it had a rival scheme.

TNK-BP, in which BP has 50%, was finally forced to sell Kovykta to Gazprom, but the three firms agreed to set up a bigger gas venture based on assets worth at least $3 billion.

Gazprom's contribution would be represented by Kovykta, TNK-BP would contribute its other Russian gas assets, including Rospan, while BP's contribution has yet to be defined.

Deutsche UFG brokerage said BP's Trinidad offer represented good news for Gazprom but added that it expected long discussions around the venture's asset composition.

"Gazprom was originally willing to offer stakes in the Shtokman field to foreign investors in exchange for their assets worldwide but later concluded that the would-be partners were not able to offer assets similar in size and quality to the Shtokman field," said Deutsche UFG.

Shtokman is a giant Barents Sea field, which Gazprom wants to use to supply both the European and the U.S. markets.

Deutsche UFG said that, as in the Shtokman case, Gazprom may decide to value Kovykta very high.

BP may in turn argue that Kovykta's reserves are difficult to monetize given that Russian talks with China over gas supplies are stuck due to pricing disagreements. Production from Kovykta is not expected to start before 2015-2020.

"Gazprom may be unhappy with the stake offered...and demand other assets, or BP may consider the Kovykta prospects as weak," said Deutsche UFG.