Russian Prosecutor Goes After TNK-BP Gas Fields

MOSCOW, Nov 8, 2006 (Dow Jones Newswires)

Russia's general prosecutor's office filed documents Tuesday seeking the annulment of production licenses for major gas fields belonging to a unit of oil producer OAO TNK-BP (TNBP.RS), the prosecutor's office said in a statement posted on its Web site late Tuesday.

The prosecutor's office sent a letter to the federal subsoil agency, or Rosnedra, asking for the licenses to the Novo-Urengoyskoye and Vostochno-Urengoyskoye gas fields to be revoked due to environmental and licensing violations, according to the statement. The licenses for both fields are held by Rospan International, a subsidiary of TNK-BP.

"In the course of an investigation it has been established that the company ... did not fulfill all of the conditions of its licensing agreements, and systematically failed to observe legal requirements concerning environmental protections and industrial safeguards," the statement said.

TNK-BP, which is half-owned by BP PLC (BP), and half-owned by a consortium of Russian investors, said the company had operated in compliance with Russian law.

"We are not aware of any legal violations committed at Rospan," TNK-BP spokeswoman Marina Dracheva said. "We are aware of the prosecutor's application. The senior management (of TNK-BP) has been looking into the best way of tackling this issue."

Rospan International is currently producing about 1.5 billion cubic meters of gas a year, Dracheva said. The company is prepared to quickly increase that amount if its fields are allowed to be connected to Russia's trunk gas transportation network, Dracheva said.

The move against Rospan comes at a time when Russian officials are ratcheting up pressure on several oil and gas projects in Russia, many of them foreign-owned.

The company's license to develop the massive Siberian Kovykta gas field has also come under threat over complaints of violations similar to those made against Rospan International.

Dmitry Loukashov, oil and gas analyst with Aton Capital in Moscow, said the move by prosecutors may be part of a wider campaign against foreign energy companies in Russia that has been gathering momentum.

"The investment environment has become less friendly to foreigners in the oil and gas sector over the last two years," he said.

Despite the rising volume of complaints against oil companies in Russia, however, Loukashov said he didn't think TNK-BP would lose the fields.

"There is a small chance that they might lose the licenses," he said. Although some companies operating in Russia have effectively chosen to abandon licenses rather than take the trouble to fulfill licensing requirements, "there are no precedents of enforced license revocations," Loukashov said.

A spokesman for Rosnedra said the agency had received the documents from the prosecutor's office, and that the agency's leadership would soon decide whether to formally examine the question of revoking the licenses.

At the next stage, the company would be given three to six months to fix violations at the field before the license could be pulled, the spokesman said.

Copyright (c) 2006 Dow Jones & Company, Inc.


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