Energy News

Russian half of embattled BP joint venture says it's not selling

Nov 14, 2006, 15:57 GMT

Moscow - Amid concern the Kremlin is trying to drive private oil and gas producers out of Russia, an owner of the BP joint venture that is Russia's number three oil firm, TNK-BP, said he wouldn't be selling anytime soon.

'As one its founders, I believe in TNK-BP's future. I do not want to sell my stake in the company,' Viktor Vekselberg said Tuesday in remarks quoted by the Interfax news agency.

Earlier in the day, the deputy director of Russia's environmental watchdog, the Federal Service for Natural Resources Use, hinted federal officials might try to pressure TNK-BP with checks at its Samotlorsky oil deposit.

'We have questions about Samotlorsky,' Interfax quoted Oleg Mitvol as saying about the West Siberian field.

Many have speculated the Russian state has fastened its sights on taking at least partial control of TNK-BP.

Vekselberg has said state-owned gas monopoly Gazprom has tried to buy into TNK-BP's Kovykta natural gas development. The East Siberian field, which is estimated to hold 2.1 trillion cubic metres of the fuel, is one of Russia's largest.

Federal officials have visited the deposit for multiple checks in the past year, threatening to revoke the company's licence over alleged production violations.

TNK-BP representatives also said Friday that the company had paid the government 1.44 billion dollars in 2002-03 back taxes.

Under the terms of the 2003 agreement that gave BP a 50-per cent share in the firm, TNK-BP's Russian shareholders - who also include Russian billionaire Mikhail Fridman - are responsible for all back taxes the government demands from before 2003.

The 1.44-billion-dollar payment amounted to the largest sum requested by Russia's tax authorities since they launched a 27- billion-dollar back-tax assault on former No. 1 oil producer Yukos three years ago.

Now bankrupt, that company has since sold its top production facility to state-owned Rosneft.

TNK-BP's announcement about the tax payment came one day after Russian prosecutors opened a criminal case into TNK-BP subsidiary Rospan International for alleged environmental violations at the East Urengoy natural gas deposit in Western Siberia.

But TNK-BP, with what seem to be exponentially increasing recent problems, is not alone.

Royal Dutch Shell, which is behind a 20-billion-US-dollar gas exploration project on Sakhalin Island, off Russia's Pacific coast, has been threated throughout the fall with ecological checks by the watchdog's aggressive deputy, Mitvol.

The so-called Sakhalin-2 development has also been cited for cost overruns, which, under the terms of production-sharing agreements signed in the early 1990s, means the Russian state will have to wait longer until construction costs are recouped and it can begin to collect a share of the profits.

On Tuesday, Mitvol said the government would be calculating for another six months how much money it had lost due to the overruns.

'Our squandered earnings are 10 billion dollars. And the funny thing is that that number was supplied by the very company backing the project,' he said, Interfax reported.

Meanwhile, Kremlin sources Tuesday responded to NATO warnings of a Russian-led gas cartel.

'Russia is actively effecting its plans for energy security, which the country initiated and made one of the main themes of the Group of Eight summit (in St. Petersburg),' Interfax quoted an unnamed official as saying.

For his part, when asked Tuesday whether he thought the Russian government wanted to gain control of TNK-BP, Vekselberg answered: 'That's a simple question with a simple answer. No.'