Russia Oil Min: Undecided on How to Develop Kovykta Gas Field

PARIS, May 31, 2007 (Dow Jones Newswires)

Russian Industry and Energy Minister Viktor Khristenko said Thursday that the government hasn't decided how to develop the Kovykta gas field, the subject of a serious dispute between regulators and license holder TNK-BP (TNKB.RS) that may come to a head by Friday.

Khristenko, speaking with reporters on the sidelines of an energy conference here, said; "It's a difficult and huge field. The reserves of helium are huge. We don't know yet how to develop them. We haven't come to a final decision."

The Russian government could withdraw the license of TNK-BP to develop the Kovykta by Friday because the company has produced just a fraction of the gas it is required under its contract with the Russian government.

The company has been prevented from selling the gas to China and South Korea by Russian gas monopoly OAO Gazprom (GSPBEX.RS). By law, Gazprom is the only company in Russia allowed to export gas.

Khristenko said it was up to Gazprom to decide if it wanted to be involved in the project. On Kovykta, Khristenko drew parallels with the huge Sakhalin-2 oil and gas development on Russia's eastern coast, which Gazprom took over from Royal Dutch Shell PLC (RDSB.LN) in April.

That move, he said, had spurred development of the costly and delayed project, implying development of Kovykta would accelerate if similar circumstances developed there.

He added: "We should stop politicizing the energy subject."

Investors and customers are becoming increasingly nervous about what they regard as Kremlin-inspired moves to revise the terms of major resource projects to Russia's benefit.

They fear a worsening investment climate will lead to a slower pace of resource development in a period of high demand.

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