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Reuters: PwC loses Russia’s Sakhalin-2 audit contract

Fri Apr 13, 2007 5:29 PM BST

MOSCOW, April 13 (Reuters) – Russia’s $22 billion Sakhalin-2 oil and gas project, taken over last year by Gazprom , has dropped PricewaterhouseCoopers [PWC.UL] as its auditor, the energy ministry said in a report obtained by Reuters on Friday.

Gazprom said earlier this week that it had kept PwC on as its own auditor, a vote of confidence after the “big four” accounting firm lost its job as auditor to Russian carmaker AvtoVaz and ran into trouble working for the now bankrupt oil firm YUKOS .

But Gazprom has terminated the firm’s 10 years as auditor to Sakhalin-2, according to the Russian government’s annual review of production-sharing agreements, of which Sakhalin-2 is one.

“Its work was viewed by Russia as unsatisfactory because of its constant comments relating to completion of the audit accounts and the amount of reimbursable expenditure,” the energy ministry report said.

Under the production-sharing agreement, the state only gets royalties from the project after reimbursing the operator’s capital investments.

The document said that after a tender process, the new auditor would be a Russian company, Finekspertiza.

Energy Minister Viktor Khristenko, who sits on the Sakhalin-2 supervisory board, denied that PwC had suffered because of its link to YUKOS.

“I don’t see any signal or any sensation here,” he said at a news conference on Friday. “The decision about the change of auditor was taken by the supervisory board. Decisions like this are taken, as a rule, to stop blood clotting in the veins. This isn’t a family thing, this is business.”

U.S. Commerce Secretary Carlos Gutierrez told a Russian newspaper last month that the authorities should not apply the law selectively in their probe of PwC after a court ruled it had breached rules while auditing YUKOS.

The court fined PwC about $500,000 for producing false audits for YUKOS and helping it evade tax, and the firm must now wait to find if its licence to work in Russia, which expires next month, will be renewed.

The case is politically charged because YUKOS shareholders say the Kremlin deliberately destroyed YUKOS and pursued people and entities associated with it to punish its main owner for harbouring political ambitions.

PwC is also facing a separate $11 million back-tax claim.

Last month, interior ministry officials searched PwC’s offices, prompting the firm to object that the records that were removed went well beyond the scope of the tax claim. 
© Reuters 2007. All rights reserved

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