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Financial Post – Canada: Russia probes oil firms: Government crackdown on big producers widens

Published: Oct 17, 2006

OAO Lukoil and OAO Rosneft, Russia’s largest oil companies, are being investigated by the Natural Resources Ministry, and state-controlled OAO Gazprom and others may follow, as the government extends a crackdown on oil producers.

Lukoil may lose some licences for failure to develop fields, Oleg Mitvol, the deputy head of the Natural Resource Ministry’s environmental inspectorate, said yesterday in Moscow.

Mr. Mitvol has led efforts to cancel a key permit for Royal Dutch Shell PLC’s US$22-billion Sakhalin-2 venture on environmental grounds.

“Lukoil took the licences but isn’t using them,” Mr. Mitvol said at a press conference. “It’s using them only to increase its market capitalization.”

The expanded checks come before President Vladimir Putin meets with the 25 European Union heads of state in Finland on Oct. 20. The EU, Japan and Shell last month criticized Russia for its effort to cancel a Sakhalin-2 environmental permit.

Shell, BP PLC, Exxon Mobil Corp., and Total SA have faced environmental and licence reviews as Mr. Putin seeks a greater role in the energy industry for state-controlled companies.

Gazprom will face unscheduled reviews, Mr. Mitvol said, without specifying whether they are environmental or licence checks or which sites they cover. He said OAO Rosneft-Sakhalinmorneftegaz can expect “multimillion” fines for environmental violations on Sakhalin Island, seven time zones east of Moscow.

“Other companies can await similar checks,” Mr. Mitvol said.

The Natural Resources Ministry said yesterday it had asked tax authorities for information on 398 Lukoil licences. Based on that information the ministry will check whether those fields are really being worked or are lying idle.

The ministry last week said Lukoil was violating licence agreements and subsoil laws at 19 sites. It decided to try to revoke eight of Lukoil’s licences in the Khanty-Mansiisk oil province and has sent the Prosecutor General’s Office evidence of violations at 11 projects in the northern Komi republic.

Lukoil received the warning in August and September and was told to fix violations within six months, the company said on Oct. 13. The company operates 406 licensed fields in Russia and has never had one revoked, it said.

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