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Bloomberg: Russian Watchdog Recommends Revoking Sibir Oil Rights (Update2)

By Greg Walters

Feb. 11 (Bloomberg) — Russia’s environmental watchdog recommended revoking production rights for a unit of OAO Sibir Energy Plc, the London-listed oil company controlled by billionaire Chalva Tchigirinski, for “serious violations.”

The unit, OAO Magna, broke ecological laws and the terms of its license, Rosprirodnadzor said in an e-mailed statement today.

Magma didn’t sufficiently utilize the gas that is produced alongside crude, the watchdog said. Rosprirodnadzor, an agency under the Natural Resources Ministry, sent its recommendations to the state commission empowered to revoke production permits.

Sibir said it had “cooperated fully” with an audit of the Yuzhnoye field that started in November, according to a company statement distributed by the Regulatory News Service today. The environmental agency scheduled a meeting with Magma for Feb. 14 to discuss the results, the company said.

“Magma has successfully operated the Yuzhnoye oilfield for over 15 years in compliance with license obligations,” Sibir Chief Executive Officer Henry Cameron said in the statement. “Should the recent audit reveal any irregularity requiring remedial action this will be dealt with forthwith.”

Sibir traded down 4.8 percent at 495.25 pence in London at 2:40 p.m., valuing the company at 1.91 billion pounds ($3.7 billion).

Exceeded Output

Magma exceeded its planned volume of crude oil output in 2005 by 20 percent, or by 66,700 tons, and the company has failed to get approval for production increases with state authorities, according to the watchdog.

Sibir’s total oil output is about 65,000 barrels a day, the company said in a statement on Jan. 17. Of that amount, 58,000 barrels of oil a day are produced at Salym, Sibir’s 50 percent- owned venture with Royal Dutch Shell Plc.

Sibir produced 17.8 million barrels of oil in 2007, compared with 9.9 million barrels a year earlier, and plans output of 25 million barrels in 2008.

Russia has gained control of oil and gas projects from producers like Shell and BP Plc following claims of environmental, tax and regulatory violations.

To contact the reporter on this story: Greg Walters in Moscow [email protected]

Last Updated: February 11, 2008 10:02 EST

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