RusEnergy

14 May 2007 - By Upstream OnLine - TNK-BP unit Rusia Petroleum has won the right to challenge in court a threat to its licence to operate the huge Kovykta gas field in East Siberia, TNK-BP said today. "Rusia Petroleum, as the project operator, is seeking legal clarification of its licence obligations to develop the Kovykta gas field," TNK-BP spokeswoman Marina Dracheva told Reuters. Rusia Petroleum, 62.4%-owned by TNK-BP, which itself is half-owned by BP, is under threat of losing the licence to operate Kovykta because the field is not producing as much gas as stipulated in the licence terms. State officials have said the company is making poor excuses for failing to meet licensing terms. But their criticism of the company has widely been seen as the stirrings of a Kremlin attempt to take over the project. In late February, Russia's Natural Resources Ministry said Rusia Petroleum had three months to increase production more than five-fold to meet the target of 9 billion cubic metres of gas per year specified in its licence. Rusia said it cannot comply because local customers do not need so much gas, while its plans to export gas to China are on hold due to the opposition of gas export monopoly Gazprom . Gazprom is seen as the key driver behind Kovykta's troubles as it needs new gas reserves for its own ambitious plans to pump gas to China. It plans to participate in Kovykta and both it and TNK-BP have said they are in active talks on co-operation. Analysts said there was still a high chance of the licence being revoked but the court's decision to hear the case was a positive signal for TNK-BP. The threat to Rusia's licence was on hold while the court hears its case. "We believe that this situation will help show the market that TNK-BP has a positive relationship with the authorities. Perceptions of negative relations are currently considered the main weakness of the company," Dmitry Loukashov at Alfa-Bank told the news agency. Russia has vastly increased state control of energy assets in the last three years and many market participants believe Kovykta is next on the Kremlin's shopping list, possibly followed by TNK-BP itself. TNK-BP, a joint venture between BP and a group of Russian billionaires, is the only big energy project in Russia which has no state shareholder and is not majority controlled by Russians. Apart from TNK-BP, the shareholders in Rusia Petroleum are Interros, an investment company controlled by Russian metals billionaires Vladimir Potanin and Mikhail Prokhorov, with 25.8%, and the government of Irkutsk region with 11.2%. TNK-BP holds Rusia Petroleum separately from its interest of around 95% in TNK-BP Holding, so any threat to Kovykta has no direct impact on the listed company.