Kremlin Increases Pressure over BP’s Kovykta Field

More trouble for the oil majors. Russia has stepped up the pressure on a key asset held by TNK-BP, BP’s Russia venture, as Lord Browne, BP embattled chief executive, arrived in Moscow for talks on the transfer of BP’s key asset to the Russian state.

Oleg Mitvol, the official who led the state campaign against Shell’s oil and gas venture in Sakhalin2, said Russia’s Natural Resources Ministry would not budge on threats to revoke TNK-BP’s licence to develop its vast east Siberian Kovykta gas field in three months time.

The Natural Resources Ministry has declared TNK-BP in violation of conditions to develop the field and has given the joint venture group three months to start producing 9bn cubic meters of gas, as the license stipulates, or have its license revoked.

TNK-BP produces a fraction of that amount and has said the terms are impossible to meet as there is not enough demand for that volume of gas in the local region.

“The conditions can be changed only one way,” said Mr Mitvol, on TNK-BP’s calls to soften licence terms that it says are impossible to meet. “You tear up the license agreement and the state sells it off at an auction anew.”

The attack on TNK-BP’s is seen by many as part of campaign by the Kremlin to tighten its grip over the energy sector.

Article Cited: Catherine Belton, “BP Facing Growing Pressure Over Kovykta Field”, Financial Times, February 27, 2007.