BP?s $18Bln Gas Project in Russia Under Threat for License and Environmental Violations

The Russian-British oil major TNK-BP may lose its permit to develop the $18 billion Kovykta gas field in Siberia due to license and environmental violations, Russian prosecutors said on Monday, Sept. 25.

Valery Pak, the head of TNK-BP unit Rusia Petroleum, was summoned to the Prosecutor General?s Office and ?officially warned? his company must fix the problems or face losing its license in the Irkutsk region, according to a statement today posted on the prosecutor?s Web site.

?We are developing the project in accordance with the license terms,? Alexander Shadrin, a spokesman for TNK-BP, told Bloomberg by phone from Moscow. ?This week, we have started construction of the first stretch of a pipeline to supply gas to the local market? in accordance with the license terms.

TNK-BP, Exxon Mobil Corp., Royal Dutch Shell Plc and Total SA all face demands from Russia to cede some control of oil and gas fields to the state-controlled gas and oil companies, Gazprom and Rosneft. The foreign-led ventures have become anomalies in Russia as President Vladimir Putin increases state control over the energy industry.

Russia has previously threatened to revoke drilling licenses held by Rusia Petroleum for Kovykta, Eastern Siberia?s largest gas field, unless the venture comes to an agreement with Gazprom on the pace of the field?s development.

Rusia Petroleum must supply 9 billion cubic meters of gas to the local market starting from this year, according to the prosecutor?s office statement.

The Kovykta project is in limbo because Russia?s Natural Resources Ministry hasn?t approved amendments TNK-BP submitted that would defer the start of full output to 2009, Anatoly Ledovskikh, the head of Russia?s state agency for natural resource use, said May 31.

East Siberian Gas Co., equally owned by the Irkutsk region government and TNK-BP, planned to supply as much as 2.8 billion cubic meters of gas a year staring in 2010, East Siberian said last December.

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