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The Times: BP feels the chill as Siberian court rejects gasfield plea

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May 29, 2007
Dominic Walsh

BP’s attempts to save its joint venture to exploit Russia’s giant Kovytka gasfield suffered a fresh blow yesterday when a court in Siberia threw out a legal challenge that might have preserved its licence.

The decision against its TNK-BP venture paves the way for regulators to revoke its licence on Friday and analysts believe that it will be forced to hand a majority stake in the project to Gazprom, the state-owned gas group.

A spokesman for Rosnedra, the licence regulator, said: “Rosnedra will discuss the early withdrawal of the Kovytka licence at its meeting on Friday.” The decision is being seen as part of a wider move by Russia to expand its influence in the oil and gas industry and experts believe that, once Gazprom has secured control of Kovytka, the threat to the licence will dissipate.

That outcome would in many ways mirror the fate suffered by Royal Dutch Shell, which was forced to accept a minority position in the Sakhalin-2 liquefied natural gas development off Russia’s Pacific coast.

TNK-BP, in which the British energy group has a 50 per cent stake, had turned to the Siberian court after failing to hit production deadlines, thus putting its licence in danger. The joint venture partners claimed that the three-month deadline to produce at least nine billion cubic metres of gas at Kovytka was impossible, given the lack of access to pipelines to reach export markets. TNK-BP had hoped that the court would rule that, given the constraint on exports, it should be allowed to satisfy only local demand.

Valery Titov, the judge who presided over the arbitration court in Irkutsk, eastern Siberia, threw out the suit, saying: “This dispute could not be reviewed by our arbitration court. It is out of our jurisdiction to review the submitted documents.”

A spokesman for TNK-BP said that the company would stage an appeal.

The opportunity to export gas from the field to China, which might have allowed TNK-BP a fighting chance of meeting its targets, has been blocked by Gazprom, the only company allowed by law to export gas from Russia.

Valery Nesterov, an analyst for Troika Dialog, the broker, said: “It is the same story as with Sakhalin-2, when opponents cannot withstand state pressure and surrender, while Gazprom is becoming the sole owner of all meaningful gas reserves in the country.”

http://business.timesonline.co.uk/tol/business/industry_sectors/utilities/article1851720.ece

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