Mitvol's Agency Looks Into Russneft

The Natural Resources Ministry's environmental safety watchdog said Monday that it had launched inspections of oil company Russneft's subsidiaries over reported breaches of its license terms.

Inspections -- earlier planned for the start of 2008 -- were pushed forward by a news story about the company's third-quarter report, which admitted these license violations.

Russneft's confessions to drilling too few exploration wells and insufficient crude production did not represent a change in the company's value, however. It consistently reported these violations in its previous quarterly reports.

But the third-quarter report was analyzed in business daily Vedomosti, opening up the delays and lower production levels to a larger audience, including the ministry's environmental agency.

"If we find that Russneft subsidiaries do not correct the violations, the findings will urgently be forwarded to a commission at the Federal Subsoil Resource Use Agency that rules on revocation of the rights to use subsoil resources," Oleg Mitvol, deputy head of the agency, said in a statement.

The agency will look into seven of Russneft's 21 oil units, the statement said. The licenses in question account for only 5.5 percent of Russneft's total licenses, company spokesman Eduard Sarkisov said.

"The company does not have any serious license-related risks," Sarkisov said. "The violations occur at small fields whose cumulative recoverable reserves stand at about 35 million tons."

Russneft's Chernogorskoye field produces just half of what it should according to its license, the company's third- and second-quarter reports said. Russneft should have drilled seven exploration wells at its Yuzhno-Pudinskoye field from 2004 to 2006, but it drilled just one, the reports said.

The announcement of inspections comes just days before the Federal Anti-Monopoly Service is scheduled to rule on the acquisition of Russneft by a company linked to billionaire Oleg Deripaska's Basic Element holding on Friday.