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. Last Updated: 07/27/2016

Fate of LUKoil Licenses Up in Air

The Natural Resources Ministry on Friday delayed a decision on determining the fate of some LUKoil oil field licenses in the Timan-Pechora region.

Ministry officials previously threatened to take away licenses to 730 million barrels of undeveloped crude reserves, accusing Russia's No. 1 oil major of not making the progress required in its agreement with the government.

Over the next couple of months, the ministry's expert council will carefully examine LUKoil recommendations to change the licensing agreement, said Kirill Yankov, a deputy minister in charge of the licensing department.

Hydrocarbon reserves in those Timan-Pechora fields officially belong to Arkhangelskgeodobycha, or AGD, 74 percent of which is owned by LUKoil. Another 25.5 percent belong to the state-owned oil company Rosneft.

"The situation surrounding AGD is very complicated," Yankov told journalists. "There are many details we still don't understand to their fullest extent."

LUKoil officials on Friday could not be reached for comment.

If the ministry is going to demand strict adherence to licensing agreements on the part of oil companies, then the same should be asked of federal and regional government officials, Yankov said.

The United Financial Group brokerage viewed the ministry's threats as a negative development for LUKoil in one of its most strategically important regions.

"This example shows that LUKoil's resources are stretched and that, without a greater focus on shorter term goals, the value of its assets may be impaired," UFG said in a research note.

While Yankov said that recommendations from all sides -- the ministry, the administration of the Nenets Autonomous Region and LUKoil -- should be analyzed before a decision can be made, he didn't offer the same treatment to Severnaya Neft, a mid-sized oil producer fighting to keep its own license to Timan-Pechora fields.

Severnaya Neft -- and its license to the Val Gamburtseva fields -- has become the poster child for the ministry's new-found mission to punish companies that it accuses of improperly acquiring their licenses or that let lucrative oil fields lie idle.

Russia's oil majors cried foul in March when Severnaya Neft was granted the Val Gamburtseva license, but the previous natural resources minister maintained the tender was conducted fair and square.

Severnaya Neft's luck changed with the appointment of a new minister, who promptly announced that Val Gamburtseva will once again go on the auction block.

Alexander Samusev, president of Severnaya Neft, complained earlier last week that his company wasn't afforded the same consideration as LUKoil.

"We were invited to a meeting of ministry experts," Samusev said. "I sent a representative, and he was asked why he even bothered to show up. He presented his case, and then the ministry officials kept on talking as if he never made his presentation."

The ministry declined to comment on the Severnaya Neft dispute.