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Daily Express (UK): BP’s share of Siberian gasfield slipping away

Tuesday 29 May 2007
By Andrew Johnson Associate City Editor

BP’S Russian joint venture could lose a licence to operate one of the world’s biggest gasflelds this Friday, it emerged yesterday.

Russian regulators said they would discuss stripping TNK-BP of the licence to work the $20 billion (£10billion) field on June 1.

Their move follows a decision by the arbitration court in the East Siberian city of Irkutsk to throw out a case brought by TNK-BP in an attempt to stop the licence from being revoked.

The judge who heard the case, Valery Titov, said: “This dispute could not be reviewed in our court.”

The gasfield, Kovytka, holds enough reserves to supply the whole world for nearly a year.

It has been the subject of a lengthy battle between TNK-BP and the Russian authorities.

The Russian environmental agency has said the licence should be revoked because TNK-BP is not producing enough gas from the field.

Analysts say the Russians are keen to regain control of the strategic energy resources they sold in a wave of privatisations following the collapse of communism.

BP’s rival Royal Dutch Shell and its partners were forced to  sell a controlling stake in their Sakhalin II gas project to Russian state-owned energy giant Gazprom last year. The sale came after the Russian authorities refused to grant crucial environmental certificates.

BP said at the time its case was different because TNK-BP is half-owned by Russians.

But analysts believe the country’s government is trying to pressurise BP’s partners into selling to Gazprom or another Russian energy giant, Rosneft.

The pressure has been applied again through the environmental agency. It has said that, under the terms of the licence, TNK-BP was supposed to produce 9 billion cubic feet a year by 2006. But the company has so far only produced 2.5billion cubic feet a year.

TNK-BP said this was because the authorities have refused to grant an export licence, so the field’s output is limited to the Irkutsk region where demand is much less than 9 billion cubic feet a year.

BP is expected to appeal. TNK-BP has said it is willing to let Gazprom control Kovytka if the field becomes part of a bigger development in East Siberia.

City & Business
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