Bad news for BP in Russia as $1bn deal cancelled

BP, still struggling to contain the environmental and political fallout from the Deepwater Horizon oil leak in the US, has suffered a $1bn hit on its 'eastern front' after Gazprom, the state-run Russian gas monopoly, pulled out of a deal to buy a huge gas field in eastern Siberia.
 
Yesterday, while Barack Obama was telling NBC television that he would have fired BP’s chief exec Tony Hayward for the comments he’s made about the crisis, Gazprom executive Viktor Timoshilov quashed rumours he might buy BP's interest in the 2 trillion cubic metre Kovytka gasfield, claiming Gazprom had ample gas fields to exploit elsewhere.
 
This despite the fact that Kovytka was only up for sale for $1bn because Russia had previously designated the gasfield a strategically important reserve that should only be developed by a company that is majority owned by Russians.
 
TNK-BP, the British oil giant's joint venture with a Russian company, was first asked to sell the rights to the Kovytka gasfield to Gazprom in 2007, but negotiations broke down over the price. Rusia Petroleum, the Russian majority-owned company through which TNK-BP was to exploit Kovytka, has now been forced to file for bankruptcy. As a strategic reserve, Kovytka is most likely now to fall to Gazprom anyway.
 
A Moscow spokesman for BP said yesterday: "It looks like the assets will be sold. It is hard to say when but I don't expect it to be a very quick procedure."
 
Investors have long expected BP to lose its interest in Kovytka, but the company's share price continued to plummet today nonetheless, because of fears of the cost of the Guld of Mexico oil spill.

Two international brokers changed their recommendation to potential buyers looking at BP stock to "neutral" – a damning indictment of the company’s chances of recovering from its current woes. ·