Kovykta to Lie Idle

There is an article in Upstream Online which is a great example of the incompetence with which the Russian oil and gas sector is run:

Russian gas giant Gazprom sees no need to develop the giant Kovykta gas field in the near future, a company executive told a news conference today.

“From the point of view of long-term balance we don’t see how gas from Kovykta can be used,” Reuters quoted Viktor Timoshilov as saying.

UK supermajor BP’s Russian venture, TNK-BP, said last week its unit that controls Kovykta had filed for bankruptcy following a failure by TNK-BP to sell the field to the Russian government.

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 Gazprom a gas export monopoly.

Russian officials have repeatedly threatened to withdraw the Kovykta licence from TNK-BP for low production volumes.

So in May 2007 the Russian government banned TNK-BP from selling gas to China and then threatened to withdraw the Kovykta licence for the subsequent low production volumes; a month later the government forced an agreement on TNK-BP to sell a majority stake in the field to Gazprom, which it rapidly backed down on once it ran out of money in the oil price crash;  and three years later they don’t have a clue what to do with it having forced the operator into bankrupcy.

This is one of the biggest gas fields in the world, there was a competent part-Russian joint venture operating the field for 15 years which knew exactly what to do with the gas but was prevented from doing so, and now it will lie idle because the Russian government doesn’t know what to do with it.

And there are people who wonder why I don’t think Russia will ever achieve anything like its potential.

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