Business Week: Russians probe gas field venture

EXTRACT: The move by Rosprirodnadzor suggests that Kovykta’s fate could mirror that of Shell’s $22 billion (euro17 billion) project on Sakhalin island, off Russia’s Pacific coast. After a barrage of environmental probes led by Mitvol, Shell and its Japanese partners agreed in December to sell a controlling stake to Gazprom.

The Associated Press January 18, 2007, 10:50AM EST

MOSCOW: Russia’s environmental watchdog agency is preparing to probe a giant natural gas field owned by BP PLC’s Russian joint venture, a top agency official said Thursday.

Oleg Mitvol, the deputy head of Rosprirodnadzor, told The Associated Press his representatives in the region had begun gathering data on the Kovykta field in eastern Siberia, which has gas reserves of over 2 trillion cubic meters.

Analysts have suggested that Kovykta could be the next foreign energy development to be taken over by state controlled gas monopoly OAO Gazprom.

The documents are due to be submitted by the end of the month, after which a full check would be launched, “possibly in February or March,” Mitvol said.

Under President Vladimir Putin, the Kremlin has moved to reassert its control over Russia’s vast energy reserves. Last year Gazprom obtained a majority stake in a giant liquefied natural gas project led by Royal Dutch Shell that had been subject to months of regulatory pressure.

In a separate statement, Rosprirodnadzor said the first stage of the check would focus on whether the Rusia Petroleum unit of BP’s Russian joint venture had fulfilled its production obligations at the site.

Under the terms of its license the unit was due to have produced some 9 billion cubic meters of gas last year, but did not do so because it has no framework to export the gas and domestic gas demand in the region amounts to only a few billion cubic meters.

Analysts say the BP subsidiary, TNK-BP, will only be able to export gas to lucrative markets in China and South Korea once it agrees to let Gazprom into the project on terms that suit the monopoly. By law Gazprom is the only company in Russia that can export gas, and it holds de facto veto power over BP’s plans.

The move by Rosprirodnadzor suggests that Kovykta’s fate could mirror that of Shell’s $22 billion (euro17 billion) project on Sakhalin island, off Russia’s Pacific coast. After a barrage of environmental probes led by Mitvol, Shell and its Japanese partners agreed in December to sell a controlling stake to Gazprom.

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