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Financial Times: Blair to quiz Putin about BP and Shell

By Ed Crooksand Jean Eaglesham
Published: June 5 2007 03:00 | Last updated: June 5 2007 03:00

Tony Blair is expected to raise the issue of Russia’s treatment of BP and Royal Dutch Shell at a meeting with Vladimir Putin at the Group of Eight summit this week.

The prime minister is likely to have a one-to-one meeting with Mr Putin at the summit in Germany and plans to raise economic issues, including the pressure exerted by Russia on the British oil companies.

Mr Putin suggested yesterday that he had lost patience with TNK-BP, BP’s 50 per cent-owned joint venture, over its vast Kovykta gas field.

Russia has threatened TNK-BP with the loss of its licence for Kovykta, an important prospect for the company’s long-term growth.

Mr Blair’s spokesman said yesterday: “The sort of investment climate in a country depends on the way in which it treats companies: that is simply a statement of fact.”

In an interview text released yesterday, Mr Putin signalled that TNK-BP had run out of time over Kovykta, demanding: “If the members of the consortium are doing nothing to meet licence obligations, how much longer do we have to tolerate this?”

Under the terms of its licence, TNK-BP is supposed to produce 9bn cubic metres of gas a year from Kovykta, but it is producing less.

Mr Putin also brushed aside TNK-BP’s argument that there would be no point producing more gas as it could not be either used locally or transported elsewhere. “They knew about it when they bid for the licence. They knew about these problems and possible restrictions. And they nevertheless bought the licence,” Mr Putin said.

Last Friday, Russia delayed for up to two weeks a decision on whether to strip TNK-BP of its licence for Kovykta. Russia’s natural resources ministry said a final ruling could be issued at any time within the next two weeks, following recommendations from a meeting of the licensing commission.

Robert Dudley, TNK-BP’s chief executive, said yesterday that he was still keen to bring Gazprom, the state-controlled gas company, in as a partner in Kovykta, and talks over the future of the field were continuing. Last week, Tony Hayward, BP’s new chief executive, met Alexei Miller, Gazprom’s chief executive.

TNK-BP also said yesterday that it planned to double investment next year in its Uvat oil project in West Siberia as part of a plan to raise production sixfold to about 200,000 barrels a day by 2020.

The political sparring over Kovykta came as Mr Hayward redefined the company’s famous “beyond petroleum” slogan, emphasising the continuing importance of the production and use of fossil fuels.

In a speech to politicians and business leaders in Berlin ahead of the summit, an early statement of intent for his leadership of the company, Mr Hayward called for more government incentives to encourage the introduction of new low-carbon technologies.

He also argued that “beyond petroleum” had been misunderstood, saying it was “essentially about three things: producing more fossil fuels more efficiently today, making better use of fossil fuels and beginning the transition to a low carbon future.”

The slogan, launched in 2000, has been controversial. Internally, some saw it as demoralising: the staff responsible for the vast majority of the company’s profits were being told that theirs was an outmoded business. Externally, it won Lord Browne, the then chief executive, many plaudits, but BP was also attacked for “greenwash” – pretending to environmental credentials not justified by its record.

While it helped modernise BP’s image, it also helped steepen the plunge in the company’s reputation following problems such as the oil spill in Alaska last year and the explosion at the Texas City refinery in 2005.

Copyright The Financial Times Limited 2007

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