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The Times: Worth losing

June 23, 2007
James Harding, Business Editor

Better to sit out the game on the bench than to be kicked off the team.

BP never had a hope of hanging on to Kovykta, an asset that, like Shell’s Sakhalin-2, is so rich and was acquired for a song in the dubious casino run by Boris Yeltsin during Russia’s period of cowboy capitalism.

The Siberian gasfield is a latent monster. It could keep Britain going for two decades but it has no value today, lying stranded in a region rich in resources but empty of people and industry. The obvious customer is China, and Beijing is desperate to buy Kovykta’s gas. But the Kremlin is in no hurry to supply the fuel China needs to consolidate its economic supremacy in Asia. There are historic quarrels between the two nations and fears about Chinese immigration into Siberia. For all its quarrels with Europe, the Kremlin still looks west. Even now, it is building pipelines to Europe, not to Asia and bumptious BP may have been too aggressive in pushing the China card.

Still, the new BP chief appears to have secured what matters. TNK-BP survives; without its Russian joint venture, BP would be in a sorry state today. Whatever growth remains in BP’s portfolio is in the Russian joint venture without which the British group would not have replaced its reserves last year. If the loss of Kovykta allows BP to continue ploughing Russian fields, it is a price worth paying.

http://business.timesonline.co.uk/tol/business/columnists/article1975098.ece

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