BP could lose licence for Siberian gas field

Russia is moving closer to stripping oil major TNK-BP, half-owned by BP plc, of its licence for the giant Kovykta gas field after authorities won a court case against the firm yesterday.

A judge in an arbitration court in Irkutsk, the region in East Siberia where the field is located, said he had ruled to throw out a suit by TNK-BP, which was seeking to stop the authorities from taking away the licence.

"This dispute could not be reviewed by our arbitration court. It is out of our jurisdiction to review the submitted documents," said Judge Valery Titov, who presided over the hearing.

The protracted battle for Kovykta, which has enough reserves to supply the world with gas for almost a year, is seen by many analysts as part of a Kremlin drive to consolidate major energy resources under state control.

It has also been interpreted as state pressure on the group of billionaires who own the other half of TNK-BP to sell out to a Kremlin-controlled firm, which would become BP's partner.

The court decision came as Russia's environmental agency, RosPrirodNadzor (RPN), yesterday finished a final inspection of Kovykta and reiterated its accusation of underproduction.

"Our checks showed again that Kovykta is not complying with production terms," RPN deputy head Oleg Mitvol said. "Today we filed the documents to Rosnedra and it is now up to the agency to decide on the terms and timing of licence withdrawal."

Like RPN, Rosnedra is also part of Russia's resources ministry. RPN can only recommend actions against companies, while Rosnedra can order those actions to be enforced.

Mr Mitvol said earlier this month that Rosnedra could withdraw the licence before June.

TNK-BP had hoped to use Kovykta for gas exports to China but says it has been forced to underproduce because gas export monopoly Gazprom refuses to let it do so.

TNK-BP's Rusia Petroleum unit, which holds the licence, now has the right to appeal against the decision.

"We are disappointed by the court's decision. I think Rusia Petroleum will appeal," said TNK-BP spokesman Alexander Shadrin.

Mr Mitvol led the state's environmental campaign against Royal Dutch Shell's Sakhalin-2 oil and gas group last year, although the pressure quickly subsided after the group agreed to sell a controlling stake to Gazprom for $7.45 billion (€5.54 billion).

The final check on Kovykta confirmed the results of a major inspection completed in January,when the agency gave Rusia Petroleum three months to rectify violations at the field or lose its licence.

Under the licence terms, Kovykta was to produce nine billion cubic metres by 2006, but without an export licence its output has been restricted to the smaller needs of Irkutsk. TNK-BP has said it is ready to let Gazprom control Kovykta if the field becomes part of a bigger development in East Siberia. - (Reuters)