TNK-BP Given 3 Months to Fix Kovykta Violations

MOSCOW Feb.9, 2007 (Dow Jones Newswires)

Russia's subsoil agency has given Anglo-Russian oil producer TNK-BP Holding (TNBP.RS) three months to fix licensing violations at its Kovykta natural gas development or risk losing the license to develop the field, Russian environmental regulator Oleg Mitvol told Dow Jones Newswires Friday.

The subsoil agency, Rosnedra, couldn't be reached Friday for confirmation.

Russian officials have threatened to revoke the license due to underproduction at the field. TNK-BP has maintained the local area doesn't need the amount of gas that must be produced according to the development license.

Mitvol, deputy head of Russia's environmental watchdog Rosprirodnadzor, said he wasn't aware of any significant environmental violations at the production area.

Mitvol has become famous in Russia for his aggressive stance against oil companies, especially foreign ones, both over their environmental policies and other issues not directly in his portfolio.

TNK-BP is half-owned by BP PLC (BP), and half-owned by a consortium of Russian investors. The license for Kovykta is held by TNK-BP subsidiary, Rusia Petroleum (PTRL.RS).

TNK-BP officials freely admit that Rusia Petroleum produced only a fraction of the 9 billion cubic meters of gas it was obliged to produce last year according to its license.

The company has been stifled from selling the gas to China and South Korea by Russian gas monopoly OAO Gazprom (GSPBEX.RS), with whom TNK-BP has sought in vain for an agreement on exports.

By law, Gazprom is the only company in Russia allowed to export gas.

TNK-BP spokesman Alexander Shadrin said the company had no comment.

A Rosnedra committee meets biweekly to discuss revoking subsoil development licenses, but according to Russian law it must give the company from three to six months to fix violations.

TNK-BP Chief Executive Robert Dudley has said his company is in little danger of losing the license for Kovykta, but has also played down the damage that pulling the license would cause since TNK-BP has yet to book any of the Kovykta reserves.

Copyright (c) 2007 Dow Jones & Company, Inc.


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