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The Associated Press: BP’s Russian joint venture chief plays down fears of license revocation

Published: October 3, 2006
 
MOSCOW The head of British oil giant BP PLC’s Russian joint venture expressed hope Tuesday that a compromise could be reached with authorities over a license to develop the giant Kovykta natural gas field in East Siberia.
 
Last week prosecutors said the company — TNK-BP — had not met production goals at the Kovykta field and had violated environmental regulations.
 
The announcement follows the decision by the Russian natural resources ministry to pull an environmental permit at a giant oil and gas project led by Royal Dutch Shell PLC in the Russian Far East — a move that spooked western investors and could see work halted.
 
TNK-BP chief executive Robert Dudley said he doesn’t expect to lose the license.
 
“I think we’ll find a compromise,” Dudley said. The only environmental issues to be resolved are “sewage problems.”
 
According to the 14 year-old license TNK-BP committed to supply 9 billion cubic meters of gas to residents in the Irkutsk region in 2006 through its RUSIA-Petroleum subsidiary, which is developing the Kovykta site.
 
However, Dudley said that if the company were to produce that amount most of the gas would have to be flared because there isn’t the demand in the region. True demand is for about 3 billion cubic meters of gas this year.
 
Potential gas production at the Kovykta field, which holds reserves of 1.9 trillion cubic meters, could reach 40 billion cubic meters a year. TNK-BP plans to supply the domestic market and countries such as China and South Korea.
 
Analysts say authorities are turning up the pressure at both Kovykta and Shell PLC’s Sakhalin-2 to secure a better deal for state gas monopoly Gazprom in the projects.
 

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