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Irish Times: Russian government considers stripping licences from Lukoil

EXTRACT: Markets were sceptical that Russian environmental authorities, who have waged a fierce campaign against Royal Dutch Shell’s giant Sakhalin-2 project, would actually remove licences from a Russian oil giant.

THE ARTICLE

Oct 14, 2006

Russia’s government, keen to show it is not only targeting foreigners for environmental breaches, said yesterday it might strip up to 19 licences from domestic giant Lukoil.

Russia’s outspoken environmental watchdog Oleg Mitvol led the criticism of the nation’s top oil firm while on a trip to the Arctic north of the Komi republic in western Russia, where Lukoil is active.

After listening to villagers’ complaints about pollution, he prodded a frozen pond with a stick to reveal oily-looking water underneath. “In the rest of the world, companies work according to environmental regulations. But here in Russia for the past 15 years people have been doing whatever they wanted,” he said.

Markets were sceptical that Russian environmental authorities, who have waged a fierce campaign against Royal Dutch Shell’s giant Sakhalin-2 project, would actually remove licences from a Russian oil giant.

Lukoil’s shares were up almost 3 per cent at 2,085 roubles 61.71) by lunchtime yesterday, despite Mr Mitvol’s threats.

Mr Mitvol, who works under the Natural Resources Ministry, has also been vociferous in his attacks on foreign companies working on Sakhalin. “Everywhere I’ve been in Russia, I’ve never seen anything as bad as Sakhalin,” Mr Mitvol said.

But he added that foreign firms were more cooperative than Russian firms, which needed to put their house in order too.

Other oil sites in the Komi area, close to the town of Usinsk, include Total’s Kharyaga PSA, although it was not in Mr Mitvol’s sights yesterday.

The Natural Resources Ministry in Moscow said eight Lukoil deposits in Khanty-Mansiisk in western Siberia and 11 in Komi could lose licences due to alleged breaches of licensing terms.

“The inspections are a part of a state campaign to strengthen control over the oil and gas sector,” said Valery Nesterov, an energy analyst at Troika Dialog brokerage. But he downplayed the risk that Lukoil might be deprived of valuable licences. “The list of the companies which have been threatened with having their licence revoked is very long but no licences have actually been withdrawn so far,” he said.

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