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. Last Updated: 07/27/2016

Mitvol Threatens FSB Inquiries

MTEnvironmental official Oleg Mitvol
Environmental official Oleg Mitvol on Thursday broadened his attack on Imperial Energy, threatening to initiate an FSB investigation of the London-listed oil firm and to pull its production licenses.

Mitvol said the company, which operates in the Siberian region of Tomsk, overstated its reserves in an independent audit by appraiser DeGolyer & MacNaughton.

The campaign against Imperial Energy has come days before it is due to list additional shares on the London Stock Exchange and has caused the firm's stock to plummet for the second straight day, falling 11 percent on Thursday, one day after it lost 15 percent.

"These companies don't try to focus on development or production, but simply make money on the Western markets," Mitvol, deputy head of the Natural Resources Ministry's environmental agency, said by telephone.

Mitvol said in a statement that he had sent a letter to the Federal Security Service to investigate whether companies have inflated their reserves over the past two years to boost their market value. Imperial Energy listed on the LSE in April 2004 and is due to list additional shares before the end of the month.


ilyukhin.ru
Duma Deputy Viktor Ilyukhin
Steven Dashevsky, an analyst at Aton brokerage, speculated that the stock was sold short ahead of Mitvol's statements.

Mitvol dismissed the idea that he was going after the company for personal financial gain, however.

"Imperial Energy is one of the real success stories of international investment in the Russian oil and gas sector," Dashevsky said.

Mitvol said that about a dozen other companies would also be investigated, but he declined to name them.

Last month, an appraisal by DeGolyer & MacNaughton revealed that Imperial Energy's reserves in the Tomsk region were higher than first thought, putting them at around 800 million barrels.

Mitvol said DeGolyer & MacNaughton failed to carry out an independent review, relying instead on data supplied by the company. DeGolyer & MacNaughton works with many high-profile companies in Russia, including Rosneft and Gazprom.

Mitvol also said he found environmental violations at the company's Maiskoye field, and would ask the Federal Subsoil Resource Use Agency to withdraw its production license.

Similar statements by Mitvol characterized the environmental campaign against Shell at Sakhalin-2, which ended when the oil giant ceded a controlling stake in the project to Gazprom.

Mitvol's attention was turned to Imperial Energy by State Duma Deputy Viktor Ilyukhin.

"Some people came to me with documents," Ilyukhin said by telephone Thursday, explaining why he decided to push for an investigation into the firm.

"People from the Tomsk regional administration came to me and I saw some problems, so I asked Mitvol and the prosecutor's office to look into it."

In December, London-based mining giant Peter Hambro lost one-third of its value after Mitvol announced he might withdraw five licenses from the firm. Two weeks later, he revoked the claim and the stock soared by 12 percent within hours.

Imperial Energy operates in Tomsk and a region of Kazakhstan, and is currently producing around 3,000 barrels per day, aiming to raise that to 10,000 bpd by the end of the year and 25,000 bpd by next year.

"The group's conduct since commencing operations in Russia has been exemplary," Imperial Energy CEO Peter Levine said in a statement. "We are confident that these issues are a result of misunderstandings," he said, adding that the company had yet to receive official word of the investigation from the ministry.