Collaboration with Gazprom is a Big Chance for BP in Russia

Gazprom and BP executives held talks yesterday on forming a joint venture involving liquefied natural gas.

"In particular, the discussion was about the possibility of creating a joint venture to develop the companies' international business, including in liquefied natural gas," Gazprom's chief executive, Alexei Miller, said.

Gazprom bought control over Sakhalin-2, the world's largest LNG project, from Shell in December in a move analysts said reflected the Kremlin's desire to gain control over all big projects in strategic industries. The project on the remote Pacific island of Sakhalin is expected to start exporting LNG in 2008 and has already pre-sold almost all its annual output to long-term buyers in Japan, South Korea and the US.

Gazprom has long wanted to get into LNG and has already done a series of swap deals to enable it to gain experience by selling LNG cargoes on the Atlantic market.

An alliance with Gazprom may help BP strengthen its position in Russia. Its TNK-BP joint venture is under a cloud because the state is threatening to withdraw its licence for the Kovykta gas field, a huge field well-placed for gas exports to China.