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Houston Chronicle: BP Gas Field in Russia May Lose License

May 22, 2007, 12:28PM
By ALEX NICHOLSON AP Business Writer
© 2007 The Associated Press

MOSCOW — BP PLC’s license to develop a giant Siberian gas field could be revoked in days, Russia’s environmental watchdog said Tuesday, as pressure mounted against one of the last major foreign-controlled energy projects in the country.

Losing its license to the Kovykta field would be a painful blow for BP PLC since the company has appeared conspicuously eager to court favor with the Kremlin, which has aggressively expanded state control over the world’s biggest oil and gas industry.

Analysts suggest that official complaints over production quotas at Kovykta will fade just as soon as an acceptable deal is struck that gives control of the project to state gas monopoly OAO Gazprom.

Such a conclusion would mirror Gazprom’s entry to the giant Sakhalin-2 liquefied natural gas development off Russia’s Pacific coast, observers say, where Royal Dutch Shell PLC was elbowed into a minority position.

Oleg Mitvol, deputy head of the Rosprirodnadzor watchdog agency, told The Associated Press that a check of the field would begin Wednesday to determine whether it was meeting its production obligations.

“The time has come to fulfill the promises,” he said. “Either the company fulfills its obligations or it will lose its license.”

Mitvol contends that BP’s local joint venture TNK-BP produced just a fraction of the 9 billion cubic meters of gas it agreed to pump last year under the terms of the original license agreement signed in the 1990s. TNK-BP counters that its obligation was to meet local demand, which it is doing, and which is a tiny fraction of that amount.

Mitvol said the inspection would last several days and, if regulators determine that the obligations have not been met, the license could be pulled by the beginning of June. After the inspection, a commission comprising Rosprirodnadzor and the state subsoil agency would convene to make a formal decision. Mitvol suggested that would be a formality, taking just a few hours.

The check will be second this year after an initial inspection established the violations and gave TNK-BP three months to fix them.

Meanwhile, the TNK-BP subsidiary developing Kovykta is awaiting a court opinion that would clarify its obligations under the license _ a move that could potentially block any decision to revoke the license.

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VOICES OF HOUSTON

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 johnadonovan wrote:

We are witnessing momentous events in Russia which could change the balance of global stability. The moves by the Putin regime could be viewed as a renationalisation policy in the best interest of the Russian people. Others may suspect less noble motives by a regime driven by ego, corruption and a desire for return to superpower status.

The Russian energy dominoes are falling. First the seizure of Yukos in the most dubious circumstances, followed by the environmental blackmail tactics used against a timid Shell management running the Sakhalin2 project. Shell capitulated without putting up a fight. Putin must have taken note of how quickly Shell CEO Jeroen van der Veer threw in the towel when Hugo Chavez played the resource nationalism card in Venezuela.

I innocently played a significant role in the Russian assault on Sakhalin Energy, the company in which Shell was the majority shareholder. I co-own with my father, Alfred Donovan the website www.royaldutchshellplc.com described by the so-called “Kremlin attack dog” Oleg Mitvol, as an anti-Shell website. More information about our activities can be found on Wikipedia: http://en.wikipedia.org/wiki/Royaldutchshellplc.com

Mr Mitvol, acting in his capacity as Deputy Head of the Russian environmental agency RosPrirodNadzor, led the campaign against Shell. He has gone on record as stating that I supplied the evidence on which the Russian government was bringing a multibillion dollar lawsuit against Sakhalin Energy on alleged environmental grounds. Mitvol threatened a claim for $5 billion which later increased to $30 billion immediately prior to Shell’s surrender. The quotes from Mitvol can be read in a recent Prospect Magazine article which correctly stated that my involvement cost Shell billions:
http://www.prospect-magazine.co.uk/article_details.php?id=8209

I hoped when I supplied the information that Mitvol was acting out of legitimate genuine concern for the environment, rather than part of a ruthless plan to seize control of the Sakhalin2 project by Gazprom/Putin. I had in mind the plight of the endangered Western Pacific grey whale. The population is down to about 100 and of those only two dozen or so are females of breeding age. The only feeding ground is around Sakhalin Island. I also wanted to embarrass Shell. However, I had soon had doubts about my contact with Mitvol and these grew as a result of subsequent events.

In the interview Mitvol said that he had called in Russian “special services” to investigate the authenticity of the information I had supplied to him. It struck me as being odd at the time that he did not ask if I could put him into direct contact with the Shell insider who supplied the Shell internal documents which I had passed on to him, or if I could supply any original documents for forensic examination. I heard nothing from Mitvol. I deduced that the reference to “special services” was to intimidate Shell management. There had been allegations in the press about the untimely demise of perceived enemies of the Kremlin.

I later offered further evidence to Mitvol and subsequently to Mark Stephens of Finers Stephens Innocent, the London law firm acting for RosPrirodNadzor. I received no response from Mitvol. I did receive a reply from Mark Stephens, but it tended to confirm my suspicion about the bone fides of the campaign which the Russians had mounted against Shell. I also carried out some Internet research into Mitvol. The information revealed was interesting to say the least.

On reflection it is now plain that I played a key role in an event which set a precedence for what looks likes turning into a renationalisation programme (perhaps better described as a privatisation by Putin/Gazprom) of most of the huge gas and oil reserves in Russia. Without the documentary evidence I supplied, the Putin government might not have felt sufficiently emboldened to risk the wrath of other nations. Without its success in forcing Shell to surrender, it might not now be turning the screws on other oil company projects in Russia. Now the Putin regime has the TNK-BP project in its sights.

Posted by John Donovan
5/22/2007 2:39:16 PM

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

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