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International Herald Tribune: BP’s Russian joint venture given 3 months to fix violations at giant gas field

The Associated Press
Published: February 9, 2007

MOSCOW: Russia’s subsoil agency has given BP PLC’s Russian joint venture three months to fix licensing violations at its giant Kovykta natural gas development or risk losing the license to develop the field, Russian environmental regulator Oleg Mitvol said Friday.

Observers say that intense regulatory pressure on Royal Dutch Shell PLC’s Sakhalin-2 project led to the company selling a controlling stake to Russian gas monopoly OAO Gazprom, and suggest Kovykta could be next as President Vladimir Putin’s Kremlin seeks to expand its control over key energy projects.

Russian officials have threatened to revoke the license due to underproduction at the field. The joint venture, TNK-BP, has maintained that the local area needs only a fraction of the 9 billion cubic meters of gas it was obliged to produce last year under the original development license, which was drawn up in the 1990s.

The subsoil agency, Rosnedra, could not be reached Friday for confirmation.

Mitvol said he was not aware of any significant environmental violations at the production area. As deputy head of Russia’s environmental watchdog agency, Rosprirodnadzor, he has taken an aggressive stance against oil companies.

TNK-BP is half-owned by Britain’s BP PLC, and half-owned by a consortium of Russian investors. The license for Kovykta is held by TNK-BP subsidiary Rusia Petroleum.

The company has long been unable to reach an agreement with Gazprom on exporting the gas to China and South Korea. By law, Gazprom is the only company in Russia allowed to export gas.

TNK-BP spokesman Alexander Shadrin said the company had no comment.

TNK-BP chief executive Robert Dudley has said his company is in little danger of losing the license for Kovykta, but has also played down the damage that pulling the license would cause since TNK-BP has yet to book any of the Kovykta reserves.

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