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International Herald Tribune: Russia moves closer to stripping TNK-BP of licence for gas field

Reuters
Monday, May 28, 2007

MOSCOW: Russia moved closer to stripping oil major TNK-BP, half owned by BP Plc, of its licence for the giant Kovykta gas field after authorities won a court case against the firm on Monday.

A judge in an arbitration court in Irkutsk, the region in East Siberia where the field is located, said he had ruled to throw out a suit by TNK-BP , which was seeking to stop the authorities from taking away the licence. “This dispute could not be reviewed by our arbitration court. It is out of our jurisdiction to review the submitted documents,” judge Valery Titov, who presided over the hearing, told Reuters.

The protracted battle for Kovykta, which has enough reserves to supply the world with gas for almost a year, is seen by many analysts as part of a Kremlin drive to consolidate major energy resources under state control.

It has also been interpreted as state pressure on the group of billionaires who own the other half of TNK-BP to sell out to a Kremlin-controlled firm, which would become BP’s partner. TNK-BP’s Rusia Petroleum unit, which holds the licence, now has the right to appeal against the decision. “We are disappointed by the court’s decision. I think Rusia Petroleum will appeal,” said TNK-BP’s spokesman Alexander Shadrin.

The court decision comes as Russia’s environmental agency is due to finish this week a final inspection of Kovykta, accusing its owners of underproduction. TNK-BP had hoped to use Kovykta for gas exports to China but says it has been forced to underproduce because gas export monopoly Gazprom refuses to let it do so.

The deputy head of the agency, Oleg Mitvol, said earlier this month the licence could be withdrawn before June. Mitvol led the state’s environmental campaign against Royal Dutch Shell’s Sakhalin-2 oil and gas group last year, although the pressure quickly subsided after the group agreed to sell a controlling stake to Gazprom for $7.45 billion.

The final check on Kovykta should confirm the results of a major inspection completed in January, when the agency gave Rusia Petroleum three months to rectify violations at the field or lose its licence. Under the licence terms, Kovykta was to produce 9 billion cubic metres by 2006, but without an export licence its output has been restricted to the much smaller needs of Irkutsk region. TNK-BP has said it is ready to let Gazprom control Kovykta if the field becomes part of a bigger development in East Siberia.

http://www.iht.com/articles/2007/05/28/business/28russia-oil.php

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