UK oil major BP Plc agreed to sell its interest in the Siberian Kovykta gas field to state-controlled Gazprom at a knock-down price on Friday, as the Kremlin continues to tighten its grip over Russia's oil and gas industry.

The sale is the culmination of years of pressure on BP's Russian joint venture TNK-BP, which wanted to develop the huge field to supply lucrative export markets in Asia.

Gas export monopoly Gazprom has consistently blocked these plans, while regulators accused the Kovykta operating company, Rusia Petroleum, of breaching its license terms.

BP said Gazprom will pay $700 million-$900 million for TNK-BP's 62.7 percent stake in Rusia Petroleum, and a 50 percent stake in a smaller company which is constructing a regional gasification project.

This is a fraction of the value analysts had put on the stake in Kovykta. TNK-BP has already invested $450 million in the field -- one of the largest in the world.

TNK-BP will also receive an option to buy a 25 percent plus one share stake in Kovykta at an independently verified market price at a later date, providing certain conditions are met.

BP added that it had signed a memorandum of understanding with TNK-BP and Gazprom to create a strategic alliance to invest in major long-term energy projects or swap assets around the world.

This would facilitate Gazprom's desire to expand overseas while offering BP some hope of expanding its activities in Russia despite an increasingly hostile investment climate.

PRESSURISED GAS

BP's experience with Kovykta has been widely compared to Royal Dutch Shell's decision to cede control of the Sakhalin-2 venture to Gazprom late last year.

In both cases, negotiations were held behind closed doors amid threats from Russia's Natural Resources Ministry and against the background of rapidly growing state control over energy assets.

The ministry's licensing agency has threatened to strip Rusia Petroleum of its license, although the deadline for a decision has been pushed back repeatedly as talks between the companies got closer to a deal.

The agency's complaint that Rusia Petroleum was not producing enough gas has been widely interpreted as the latest Kremlin tactic to regain state control over hydrocarbon assets.

Sentiment continues to be geared towards making a negative out of BP's Russian travails, and this latest item will not help that current situation, said Citigroup oil and gas analyst James Neale in written research.

BP put a brave face on the deal.

This historic agreement lays the ground for powerful co-operation between BP, TNK-BP and Gazprom, BP Chief Executive Tony Hayward said in a statement.

Analysts have valued TNK-BP's interest in Kovykta at $2.0 billion to $3.6 billion, based on the field's gas being sold on local markets. It would be worth much more if TNK-BP had the right to export the gas to higher value markets abroad.

(Additional reporting by Tom Miles and Michael Steen in Moscow)

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