Russian Govt Threatens Russneft with Loss of Production Licenses

LONDON Nov 26, 2007 (Dow Jones Newswires)

Russia's Ministry of Natural Resources is threatening to revoke a number of oil production licenses belonging to RussNeft, a ministry spokesman said Monday.

The spokesman said the ministry had investigated several RussNeft oil production sites after it had admitted to violations of the licensing agreements in its third-quarter report.

The company didn't meet its output targets in the Ulyanovks, Tomsk, Hanti-Mansi and Udmurtia regions of Russia.

The company pledged to eliminate a number of the violations before the end of the year.

The ministry spokesman said the investigation would be completed by the end of the year. RussNeft repeatedly admitted violations of the licensing agreements in its previous reports.

However, this is the first time the ministry has threatened to revoke the company's licenses at these fields.

The fields amount to about 5% of RussNeft's reserves. In 2006, the company's production was about 300,000 barrels a day.

The ministry's investigation came after the company's shares were arrested due to the accusations of tax evasion and fraud.

RussNeft founder and the largest shareholder, Mikhail Gutseriyev, has jumped bail after being charged with fraud and illegal entrepreneurship.

The Russian Federal Antimonopoly Service is currently considering an application from Russia's Basic Element, the main shareholder in the country's largest aluminum company, Rusal, to acquire RussNeft and another application from Switzerland's Glencore to purchase three RussNeft subsidiaries.

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