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Wednesday, September 05, 2007

Watchdog hits out at 'reserves cheats'

27 August 2007 - Upstream OnLine - Russia is turning up the heat on UK explorers, with environmental watchdog Rosprirodnadzor claiming some are "cheating" investors by exaggerating their reserves, according to reports. Rosprirodnadzor's deputy head Oleg Mitvol called on the London Stock Exchange and other UK financial authorities to stamp out the alleged abuses, according to a report published in this morning's Guardian newspaper. The newspaper quoted Mitvol as saying: "When a proprietor-licensee has data which can be different from the state data, this is firstly abnormal and secondly a fraud. I can add that soon there will be results of our work with one company announcement which will significantly reduce reserves." Mitvol declined to name any companies under investigation. "We will be working on all companies to implement certain arrangements to bring data into compliance with the state's certified reserves figures," the paper quoted him as saying. Mitvol also flagged up what he claims are the "failures" of American auditors for not checking the details they are receiving from explorers with the Russian regulators. "The explanation is easy. Most of the reserves data does not correspond with GKZ [state reserves committee] numbers so if these auditors have some orders every three months now and retain very significant fees for the work they do, they will lose all of their clients if they start to check for accurate data." However, he denied there was any political motive behind the latest move. "The target of the Kremlin - I mean government - is to establish effective use of the subsoil and to obligate companies after they obtain their licences to do something, but not to hold licences in abeyance ... to force companies to speak to investors about risks and also to preserve and improve the image of Russia." A spokesman for London-based Pelham PR, which represents Russia-focused explorers Imperial Energy and Urals Energy, said he was not aware of the allegations until the Guardian report was published. He added he had no knowledge of any current difficulties.

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