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BP’s got problems in Russia too

As BP executives contemplate just how much the ongoing fiasco in the Gulf is going to cost them — not to mention the lost years and millions spent on greenwashing — the latest news from the company’s joint Russian venture TNK-BP is unlikely to cheer them up: TNK-BP is pushing its unit that controls the ...

NATALIA KOLESNIKOVA/AFP/Getty Images
NATALIA KOLESNIKOVA/AFP/Getty Images

As BP executives contemplate just how much the ongoing fiasco in the Gulf is going to cost them -- not to mention the lost years and millions spent on greenwashing -- the latest news from the company's joint Russian venture TNK-BP is unlikely to cheer them up:

TNK-BP is pushing its unit that controls the huge Kovykta gas field into bankruptcy, TNK-BP said Thursday, as it has failed to sell the field to the government. Rusia Petroleum, which controls Kovykta and whose management is loyal to TNK-BP, said it could not repay its loans and filed a petition to the local arbitration court of the Irkutsk region to initiate bankruptcy.[...]

Kovykta, which TNK-BP has controlled for about 15 years, had been meant to supply China before Moscow started asserting control over natural resources and made its gas behemoth Gazprom a gas export monopoly. Officials have repeatedly threatened to withdraw the Kovykta license from TNK-BP for low production volumes.

As BP executives contemplate just how much the ongoing fiasco in the Gulf is going to cost them — not to mention the lost years and millions spent on greenwashing — the latest news from the company’s joint Russian venture TNK-BP is unlikely to cheer them up:

TNK-BP is pushing its unit that controls the huge Kovykta gas field into bankruptcy, TNK-BP said Thursday, as it has failed to sell the field to the government. Rusia Petroleum, which controls Kovykta and whose management is loyal to TNK-BP, said it could not repay its loans and filed a petition to the local arbitration court of the Irkutsk region to initiate bankruptcy.[…]

Kovykta, which TNK-BP has controlled for about 15 years, had been meant to supply China before Moscow started asserting control over natural resources and made its gas behemoth Gazprom a gas export monopoly. Officials have repeatedly threatened to withdraw the Kovykta license from TNK-BP for low production volumes.

BP and its partners have argued that output targets for Kovykta set by the Russian government became too onerous after it was unable to supply China, because Russian demand didn’t make up the shortfall.

The Russian government is essentially pressuring TNK-BP to increase production while shutting them out of the lucrative export market controlled by Gazprom. TNK-BP has been trying to sell the field the cash-strapped Gazprom, but the deal has yet to be finalized.

The unit, a joint venture with a Russian investnment group, has long been a source of frustration for the British company. Back in 2008, the Russian government denied work visa extensions to TNK-BP’s British executives, who were then locked in a feud with their Russian partners over control of the company. The two sides eventually came to an understanding.

But despite the headaches, TNK-BP accounts for around a quater of BP’s global production and 10 percent of its profits. So today’s new could bring a little schadenfreude for the folks in the gulf, courtesy of the Kremlin. 

Joshua Keating was an associate editor at Foreign Policy  Twitter: @joshuakeating

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