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. Last Updated: 07/27/2016

Mitvol Targets Main Kovykta License

Itar-TassA view of the Kovykta gas field in eastern Siberia. Mitvol says TNK-BP is not fulfilling its license on the project.
TNK-BP headed closer to a standoff with Russian authorities Wednesday as a senior environmental official called for the company's main production license to be revoked.

Oleg Mitvol, the deputy head of the Natural Resources Ministry's environmental agency, said TNK-BP's license for the Kovykta gas field in east Siberia should be revoked since the company was failing to fulfill its terms.

TNK-BP subsidiary Rusia Petroleum is obliged to produce 9 billion cubic meters of gas per year, but it has been producing less than 1 bcm to supply local markets after Gazprom blocked the construction of a pipeline to export markets in Asia.

"A promise is a guarantee in any country," Mitvol said by telephone. "If you don't fulfill your license, then the license must be taken away."

Mitvol's agency does not have the power to revoke licenses. But the outspoken official is seen as the public face of a state campaign to scoop up oil and gas assets. After he threatened to sideline Sakhalin-2 over purported environmental violations last year, project operator Shell and its Japanese partners sold a 51 percent stake to Gazprom. President Vladimir Putin has since said all environmental problems have been corrected.

TNK-BP and Gazprom currently are negotiating Gazprom's entry into Kovykta, which is estimated to hold 1.9 trillion cubic meters of gas.

TNK-BP spokeswoman Marina Dracheva reiterated the company's position that while it could produce 9 bcm per year, there was not enough demand. She said demand in the area, Irkutsk, would only reach 2.5 bcm by 2009.

Without access to Gazprom's closely guarded export pipeline monopoly, many firms operating in Russia are constrained to limit supply.

Mitvol's statements came a day after TNK-BP said Gazprom had nearly halved the amount of gas it would allow TNK-BP to ship through its pipelines from the Achimov field in west Siberia. Gazprom allotted TNK-BP subsidiary Rospan 2.5 bcm last year, but just 1.7 bcm this year, Dracheva said.

In another development, outgoing BP CEO Lord Browne and Tony Hayward, his replacement, were in Moscow on Wednesday for talks with government officials and firms.

Aside from seeking entry into Kovykta, Gazprom has also said it is interested in buying the 50 percent stake of TNK-BP's Russian shareholders when a clause obliging them to maintain ownership runs out this year. A TNK-BP official said the clause was due to expire at the end of 2007.

Gazprom may also be interested in a potentially large gas field just 100 kilometers from Kovykta's boundary that was recently registered by an unknown company named Petromir, Vedomosti reported Wednesday. Petromir is headed by a businessman named Anatoly Oruzhev, and registered offshore on the Channel Island of Guernsey, the paper said. It cited a Gazprom source as saying Oruzhev had offered to sell the field to Gazprom for $500 million.

Petromir estimates that the Angaro-Lunskoye field holds 1.2 trillion cubic meters of gas, with proven reserves of 1.5 billion, but many, including Mitvol, are questioning those figures.

"This company has drilled only one well and put 1.5 bcm on their balance sheet. It's physically impossible," Mitvol said.

Also Wednesday, Tyumen Deputy Governor Alexander Moor said TNK-BP planned to invest $3.5 billion over the next three years to develop fields in Uvat, Tyumen region, Interfax reported.

Dracheva declined to comment on the report, citing legal limitations ahead of an upcoming eurobond issue.