RIA Novosti: Ministry denies plan to revoke Kharyaga oil deposit license-1

13:26 | 12/ 10/ 2006
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MOSCOW, October 12 (RIA Novosti) – Russia’s Natural Resources Ministry said Thursday it will not revoke the license held by French oil major Total to develop a field in the north of European Russia.

“No action is being taken to revoke the license,” Yury Trutnev said. “Just as with regard to other subsoil users, this is absolutely routine work related to overseeing the implementation of licensing agreements.”

The Ministry said in late September it would start probes into deposits developed by French oil major Total and the Russian-British joint venture TNK-BP.

The ministry plans to look into the Kharyaga oil deposit, developed by Total, and the Kovykta oil and gas field, a TNK-BP project in East Siberia.

“As to the Kharyaga deposit, we have questions about the way the project has been implemented,” Trutnev said. “We are not treating them as critical so far, but they do exist. We have a timetable for checks. We will conduct probes into the Kovykta and Kharyaga deposits for compliance with the licensing agreements and environmental standards according to the timetable.”

In April, the ministry accused Total of failing to meet its targets for Kharyaga under a 1995 production-sharing agreement. It said the investor failed to increase production of crude and introduce new technologies and equipment for effective production since the agreement came into force in 1999.

Ministry experts warned that the situation could result in losses for Russia, as the country “will have to continue sending the entire deposit’s output to the investor in compensation for its expenses.”

But Russia’s president told journalists in France that talk of Total’s license for Kharyaga being revoked was an exaggeration.

“Rumors that the license will be revoked are highly exaggerated,” Vladimir Putin said after a meeting with his French counterpart.

Total owns a 50% stake in the project, alongside Norway’s Hydro (40%) and Russia’s Nenets Oil Company (10%).

Russian prosecutors issued a warning that TNK-BP, which leads the Kovykta project, could have its operating license for the East Siberia deposit, one of the largest in the region, revoked if it fails to address environmental protection and other problems.

Kovykta, with 1.9 trillion cubic meters of proven reserves, is highly important to the Russian government, which is pursuing an ambitious project to build a gas pipeline network to meet Asian nations’ energy needs and to diversify its export destinations.

The ministry’s decisions with respect to the two deposits came following a move to annul the approval of an environmental study on the Royal Dutch Shell-led Sakhalin II energy project off Russia’s Pacific coast. Sakhalin II’s oil and gas fields are being developed under another PSA.

Russian energy giant Gazprom was in talks with Shell over swapping a Sakhalin II stake for a share block in another energy project in northern Russia, but pulled out of the talks. Gazprom has also been in talks with TNK-BP on a role in the Kovytka deposit.

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