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Bloomberg: BP Russian Unit Faces Loss of Kovykta Field After Court Ruling

By Torrey Clark

May 28 (Bloomberg) — BP Plc’s Russian venture lost a court case over its license to the giant Kovykta gas deposit, allowing the government as early as this week to regain control of a field with enough fuel to supply Asia for five years.

A court in Irkutsk, Siberia lifted an order forbidding the federal government from revoking the license held by TNK-BP’s OAO Rusia Petroleum unit, after dismissing the unit’s demands to clarify how much gas it had to provide to the region.

“We won the case,” said Rinat Gizatulin, spokesman for Natural Resources Ministry Yuri Trutnev, by phone today in Moscow. “We’re just waiting for the final audit.”

The government of Russia, the world’s biggest energy supplier, has used license and environmental audits to restore state dominance over major energy projects. Gas-export monopoly OAO Gazprom, which has negotiated for a stake in Kovykta, gained control over Royal Dutch Shell Plc’s Sakhalin-2 oil and gas project last year after months of pressure from regulators.

Oleg Mitvol, the environmental regulator at the Natural Resources Ministry who led the campaign against Shell, said the last review of Kovykta was completed May 25. That review found Rusia Petroleum violated its license by failing to produce and supply Irkut with 9 billion cubic meters of gas, Mitvol said by phone today. The license can be annulled once the review is received in Moscow, Mitvol said.

“They can file court cases, but what’s the sense?” Mitvol said. “They promised to produce that much, they didn’t, and the rest is written in the law.”

TNK-BP has been defending its Kovykta license for more than four years, saying the terms of the license only require it to meet the gas demand in the local Irkutsk region, which it has said can only use 2.5 billion cubic meters of gas a year, not 9 billion as the government claims.

“TNK-BP regrets the Irkutsk court’s negative decision and the pressure to revoke Rusia’s license,” said Marina Dracheva, a TNK-BP spokeswoman. “We’ll use every avenue to defend and retain this license.”

To contact the reporter on this story: Torrey Clark in Moscow at [email protected] .

Last Updated: May 28, 2007 03:03 EDT

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