Watchdog Threatens Sibir Unit's Rights

The Natural Resources Ministry's environmental watchdog on Monday recommended revoking production rights for a unit of Sibir Energy, the London-listed oil company controlled by billionaire Shalva Chigirinsky, for "serious violations."

The unit, Magma, broke environmental laws and the terms of its license, the watchdog said in a statement.

Magma did not sufficiently utilize the gas that is produced alongside crude, the watchdog said. The agency 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 on Monday. The watchdog scheduled a meeting with Magma for Feb. 14 to discuss the results, the company said.

"Magma has successfully operated the Yuzhnoye oil field for over 15 years in compliance with license obligations," Sibir chief executive Henry Cameron said in the statement.

"Should the recent audit reveal any irregularity requiring remedial action this will be dealt with forthwith."

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 from state authorities, according to the watchdog.

Sibir's total oil output is about 65,000 barrels per day, the company said in a Jan. 17 statement. Of that amount, 58,000 bpd are produced at Salym, Sibir's 50-50 joint venture with Royal Dutch Shell.

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.