UPDATE 3-Gazprom gets upper hand on China export with field win

Tue Mar 1, 2011 12:12pm EST

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* Starting price set at $520 million

* Win secures China gas business for Gazprom

* State holding Rosneftegaz was another bidder

(Adds comment on price from license holder TNK-BP)

By Vladimir Soldatkin and Melissa Akin

MOSCOW, March 1 (Reuters) - Russian gas export monopoly Gazprom (GAZP.MM) won the rights to a giant Siberian gas field destined to supply the fast-growing markets of China, a spokesman for the sale organiser said on Tuesday.

Victory at the auction will allow Gazprom to extract the field's 2 trillion cubic metres of reserves, enough to supply the world for eight months, and forge deeper ties with China, where the Russian energy giant plans to start exporting gas in 2015.

Gazprom paid 22.3 billion roubles ($773 million) for rights, said the chief financial officer of BP (BP.L) Russian venture TNK-BP TNBP.MM, which bankrupted the subsidiary that held the license after failing to get export permission for the field.

"It is virtually for free," VTB Capital oil and gas analyst Lev Snykov said, pegging the valuation at 6 cents per barrel of oil equivalent. The stock market values Gazprom at $1.80 per barrel and global majors at $10, he said.

Gazprom shares ended down 0.6 percent, largely outperforming a weaker energy sector.

Gazprom has said it expected to wrap up long-running talks on the price of future gas deliveries to China in July. As the talks have worn on, China has expanded its supplier base through LNG deliveries and secured pipeline supplies from Central Asia. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Reuters Breakingviews column on [ID:nLDE7200S0] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

"The value (to Gazprom) will be crystallised as soon as Gazprom reaches a more distinct agreement with China but it will definitely be more than they paid for it," Snykov said.

Until Kovykta is launched, it can ship some gas from the Pacific island of Sakhalin, and it plans to build a pipeline from the Arctic fields of the Yamal peninsula.

Under the terms of the sale, Gazprom won the right to acquire the assets of TNK-BP unit Rusia Petroleum.

"The licence will be reregistered, and the winner has the pre-emptive right to acquire the licence," a spokesman for the sale organiser said.

The starting price at the auction, held in the Siberian city of Irkutsk, was set at 15.1 billion roubles.

Gazprom, which beat state holding Rosneftegaz, owner of Russia's top oil company Rosneft (ROSN.MM) with the 22.3 billion rouble winning bid, was not available for comment. "Coincidentally it is the same price we agreed with Gazprom some years ago ... and allows us to fully recover the investments on the balance sheets," TNK-BP Chief Financial Officer Jonathan Muir told a conference call on Tuesday.

TNK-BP last year filed to bankrupt its Kovykta subsidiary, RUSIA Petroleum, to recover its investments, after failing to win approval to export gas from the field, strategically located near Lake Baikal, to China.

TNK-BP had agreed in 2007 to sell Kovykta to Gazprom for about $1 billion, but the deal collapsed in a dispute on price.

Media have speculated that Russia's second-largest gas producer, Novatek NOTK.MM, in which influential trader Gennady Timchenko holds a stake of more than 20 percent, might emerge as the eventual owner of the field, a prospect VTB Capital's Snykov said was never likely.

"The political commitment is still to have everything which has to do with the future with China under state control," he said.

"Rosneft does not have an opportunity to export gas," Snykov said. "It is absolutely an appropriate decision given that Gazprom has ability to put infrastructure in place and to have this project linked to the future supplies to China."

Novatek shares fell 5.45 percent to 364 roubles in Moscow trade, and equity traders said Gazprom's win had disappointed some who had staked bets on Novatek following the news reports last week.

Rosneft shares were down 1.21 percent at 268.40. ($1 = 28.87 roubles) (Editing by Douglas Busvine and Jon Loades-Carter)

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