Mitvol: May Ask for Kovyktka License Withdrawal on Inspections

LONDON, May 21, 2007 (Dow Jones Newswires)

Russian environmental regulator official Oleg Mitvol may ask his government to pull the license from TNK-BP Holding's (TNBP.RS) Kovykta natural gas development if new inspections in a few days prove disappointing.

In an interview with Dow Jones Newswires Sunday, Mitvol, deputy head of Russia's environmental watchdog Rosprirodnadzor, said a second inspection by the Irkutsk regional regulator would take place to assess if the project will respect gas production targets set in its contract.

If the outcome is not satisfying, Mitvol said he will make a recommendation to subsoil agency Rosnedra asking that the BP PLC (BP) joint-venture "lose" its license.

The regulator said he would expect to give the recommendation "a few days" after the inspection takes place and Rosnedra would then discuss the matter "between five days and two weeks'" time.

Asked when he would expect Rosnedra to make a decision, he said "I don't know."

A BP spokesman, speaking on behalf of TNK-BP, said that a Russian court declared void previous conclusions by Rosnedra that said the venture violated the terms of its license. He said a new court hearing is due Wednesday to clarify the terms of license.

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

Mitvol has become well-known 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.

His threat to withdraw an environmental license held by the Royal Dutch Shell PLC (RDSB.LN)-led Sakhalin-II was seen a factor behind the company's decision to cede control of the project to OAO Gazprom (GSPBEX.RS) in January.

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 Gazprom, 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.

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.

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