Royal Dutch Shell Plc  .com Rotating Header Image ROUNDUP Imperial Energy sinks as Russian agency threatens to cancel oil permit

LONDON (Thomson Financial) – Imperial Energy Corp PLC shares plummeted after the Russian environmental watchdog, Rosprirodnadzor, accused the oil group of inflating its reserves estimates and threatened to cancel its licenses.

Oleg Mitvol, the deputy head of Rosprirodnadzor, made the accusations, which were vehemently denied by Imperial.

Imperial’s shares sank by nearly 30 pct to 1,039 pence following Mitvol’s comment, carried by Russian news agency interfax.

They have recovered slightly, though are still off by a hefty 12 pct at 1,270 pence at 3.45 pm, after Imperial insisted its reserves report is accurate and was prepared in accordance with internationally accepted standards by independent consultant DeGolyer and MacNaughton (D&M).

D&M also audits the energy resources of Russian majors Gazprom and Rosneft.

In a statement, Imperial said the Russia’s Natural Resources Ministry has checked the company’s oil projects in the country and have found them to be in full compliance of its licence obligations.

Imperial said it received from the Ministry on Tuesday a ‘formal written Act of Confirmation’ stating the group has ‘met or exceeded’ all of its licence commitments.

It added it is ‘not aware of any grounds’ for the statements made by the Mitvol and is currently seeking clarification from the Ministry.

Last month, Imperial upgraded the proved and probable oil reserves estimates at its 15 key fields in the Tomsk region in Western Siberia by 150 pct to 802.6 mln barrels following an audit by D&M.

Russian stockbroker Aton believes the selldown is ‘clearly overdone’ as it is finding it difficult to recall a case where a Mitvol-instigated investigation did result in license revocation.

‘We do not believe the latest news will result in revocation of Imperial’s licenses, and the stock… should ultimately return to its previous levels,’ it said, stressing the shares are likely to remain under pressure until the issue is clarified.

Another analyst also thinks the market may have ‘grossly over-reacted’ to the news.

‘It may turn out to be a storm in a tea cup,’ he said, noting the news is reminiscent of what happened to Peter Hambro Mining PLC, which produces gold in Russia, late last year.

Rosprirodnadzor threatened to withdraw some of Peter Hambro’s mining permits for alleged ecological breach. A series of inspections conducted by the Russian agency later on showed the mines were operating according to regulations.

Bridgewell reckons the issue could be as ‘innocent’ as the difference between the way the Society of Petroleum Engineers and the Russian authorities calculate reserves.

D&M uses the SPE standards in measuring a company’s oil resources.

The broker thinks investors should take the sell-off as an opportunity to buy Imperial’s shares.

Mitvol last year launched an aggressive environmental campaign against the 20 bln usd Sakhalin-2 project, pursued by a consortium led by Royal Dutch Shell PLC.

Industry experts believe the Sakhalin-2 saga was politically motivated as it led to state-owned Gazprom eventually taking on a majority stake in the giant gas project.

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