Processing Magazine

Russia threatens to pull BP license

September 26, 2006

Russian prosecutors have threatened to revoke the license of BP PLC''s joint venture to develop a giant gas field in Russia''s far east, the Associated Press reports. The move comes amid pressure on a number of foreign-controlled energy projects that observers say is an attempt to secure a bigger role for Russian companies. The Prosecutor General''s office said in a statement that the head of RUSIA-Petroleum—a subsidiary of the TNK-BP venture—had been warned that the company was violating the terms of its license. A request to revoke the license would be sent to the Agency for Subsoil Use if the violation were not addressed, the statement said. According to prosecutors, RUSIA-Petroleum had committed to supply 9 billion cubic meters of gas to residents in the Irkutsk region in 2006. Production at the Kovykta field is still in its test phase and by failing to supply the full amount the company had harmed state interests, the statement said.

TNK-BP, however, has argued that the original terms were struck 14 years ago, during which time the demographics of the region have significantly changed. The company has commissioned research that forecasts demand at the end of 2008 at just 2.5 billion cubic meters.