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Financial Times: Ministry to probe licence of TNK-BP

By Neil Buckley in Moscow and Ed Crooks in London
Published: January 19 2007 02:00 | Last updated: January 19 2007 02:00

Russia has stepped up pressure on TNK-BP, as the natural resources ministry said it was launching checks into whether the Anglo-Russian joint venture was fulfilling the licencing terms of one of its biggest assets.

The move had been signalled by the Russian authorities last year, but comes amid speculation that Moscow may pressure BP to cede some of its 50 per cent stake in the joint venture, handing control to the Russian side.

Some analysts have speculated Russia may seek to take advantage of the discomfiture of Lord Browne, the BP chief executive who was an architect of the venture in 2003 but announced last week he would step down 18 months earlier than planned.

The Russian probe follows last month’s deal by Royal Dutch Shell and two Japanese partners to sell a controlling stake in the $20bn (£10bn) Sakhalin-2 project to Gazprom, the Russian natural gas giant, after months of regulatory pressure.

Oleg Mitvol, deputy head of Russia’s environmental watchdog who led the Sakhalin-2 campaign, is involved in the TNK-BP probe. Mr Mitvol said yesterday his officials were examining the documentation of TNK-BP’s giant Kovykta gas field in eastern Siberia and would start on-site checks within months.

The environmental watchdog is looking initially into whether Russia Petroleum, the TNK-BP subsidiary operating Kovykta, has fulfilled production obligations.

The licence terms commit it to producing 9bn cu m a year from last year. But last year it produced just 1.5bn cu m and is expected to do the same this year, with production rising to only 2.5 bn cu m by 2009.

TNK-BP argues it cannot increase production further since local demand for gas is limited. Gazprom, which has the sole right to export gas from Russia, has blocked plans to build a pipeline to export Kovykta gas to China.

Robert Dudley, TNK-BP’s chief executive, has made clear he would like to see Gazprom become a partner in Kovykta and said last month talks were “at an active stage”.

Analysts have suggested Gazprom may be holding out for the field licence to be revoked or to buy out the oligarchs who control the Russian half of TNK-BP. But it could be challenged in attempts to do the latter by Rosneft, the state-controlled oil company.

The oligarchs – who are in a “lock-up” agreement until later this year – have also insisted they have no intention of selling.

Copyright The Financial Times Limited 2007

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