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A new MoU between BP and Rosneft will see more Russian natural gas flowing to Europe
BP (ticker: BP) and Russian oil giant Rosneft signed a Memorandum of Understanding (MoU) in St. Petersburg Friday to bring a new stream of Russian natural gas to Europe by the end of this decade.
Previously, BP said it could receive between 7 and 20 billion cubic meters of gas a year from Rosneft, but would only do so if Russian President Vladimir Putin agreed to break the monopoly on gas pipelines held by Gazprom.
Under the terms of the agreement, Rosneft and BP’s wholly-owned subsidiary BP Gas Marketing Limited will enter into a long-term sales and purchase agreement for the supply of natural gas produced by Rosneft in order to ensure delivery of additional Russian gas supplies to European markets starting from 2019, according to a statement from the Russian company.
“Co-operation with BP would provide Rosneft with both a new efficient gas monetization channel and the conditions required for the development of a new resource base including hard to recover gas reserves,” said Rosneft CEO Igor Sechin.
BP seeks to be heavier in natural gas than oil
David Campbell, president of BP Russia, said the deal would help the company flip its portfolio towards gas from BP’s legacy focus on oil.
“It is important in order to meet the increasing demand for cleaner energy. Gas is a growing proportion of BP’s portfolio and by the middle of the next decade we expect around 60 percent of our production to be gas, compared with around 50 percent today,” Campbell said.
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Europe receives about a third of its natural gas from Russia, and demand has been increasing as supplies from the North Sea decline. There has been a push in recent years inside of Europe to reduce dependency on Russian energy, but Russia continues to be a major supplier for much of the continent.
At the end of Rosneft’s press release, the company added, “The parties agree that Russian state support for an effective gas supplies mechanism is key to the successful implementation of the MoU,” indicating that the Kremlin will likely continue to play a major role in the project. The Russian government holds over 50 percent of the shares in Rosneft, while BP owns about one-fifth.
By Oil and Gas 360
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