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. Last Updated: 07/27/2016

Officials Urge Eni to Develop New Assets

The government wants Italy's Eni to be quick about developing its new Russian oil and gas assets, and will check up on its progress in a few months.

ArcticGaz and Urengoil, which Eni bought recently at a Yukos bankruptcy auction, have spent almost nothing on developing their fields in the past three years.

Officials plan to inspect the companies in the first half of next year, the Natural Resources Ministry said Friday, after its officials met with Eni senior vice president Marco Alvera and other executives. "The company must demonstrate active work at the fields by that time," Vladimir Smolin, deputy head of the ministry's Federal Service for the Inspection of Natural Resources Use, said in a statement.

This service played a leading role in the recent campaigns that resulted in Gazprom's takeovers of international oil and gas projects such as Sakhalin-2 and Kovykta. As part of these campaigns, officials threatened to withdraw licenses or seek environmental damages.

But Eni is less at risk of government action because it is on friendly terms with state-owned Gazprom, which has an option to buy control in both oil and gas units within two years.

Gazprom and Eni are partners in an agreement to build a gas pipeline under the Black Sea to supply Europe, signed in June. Eni hopes to use the pipeline, dubbed South Stream, to transport gas from ArcticGaz and Urengoil.

Another agency that supervises compliance with license terms, the Federal Subsoil Resource Use Agency, also urged Eni to act promptly in improving the performance of its new assets.

"Half a year is too short to catch up with the work that hasn't been done for three years," the agency's deputy head, Pyotr Sadovnik, said in the statement. "But it's necessary to start as early as today to implement the requirements to develop the fields."

Both officials made their comments at the meeting with Eni, which took place late Thursday.

Eni's Alvera said in the ministry's statement the fields' current condition did not meet license requirements. He called for a review of these requirements, saying they were a thing of the past. Eni has already contracted geological research institutions to resume exploration, he said.

The government can change the license terms if it agrees with Eni, Deputy Natural Resources Minister Alexei Varlamov said at the meeting.

Eni spokespeople in Moscow and Italy were not immediately available for comment Friday.

The latest available public data say that in 2003, ArcticGaz produced 200,000 tons of oil equivalent and Urengoil produced half that amount.

While Gazprom has delayed its purchase of both companies until next year, Eni will have to invest in them as much as needed, said Artyom Konchin, an analyst at Aton. The companies have probably foreseen the situation and for Eni "the amount that they will have to spend will hardly be a surprise," he said.

Present at the meeting were also Eni's chief in Russia, Ernesto Ferlenghi, and Paolo Formica, director of Eni Neftegas, the company that actually bought the assets at the auction.