The delay should allow President Vladimir Putin to sidestep potentially embarrassing criticism at the upcoming Group of 8 summit meeting and a high-profile economic conference. Draft minutes for the meeting reportedly included a recommendation to cancel the license. That did not bode well for BP, a company that bet heavily on Russia four years ago when it set up the venture in what was the largest foreign investment in Russia at the time. Since then, however, Russian authorities have shifted tack. The new policy favors government control over major reserves, like the Kovykta natural gas field near China. The decision on the field license will be delayed for two weeks, according to a report by the Interfax news agency; a spokesman for the committee declined to comment.
Russia is scheduled to host an economic forum next weekend intended to highlight the investment case for the country as an emerging market – a theme that could be undermined by stripping the big BP license. The field is estimated to hold the equivalent of enough natural gas to meet the entire world’s demand for one year. Also, Putin is scheduled to attend a G-8 meeting of the leaders of industrialized democracies and Russia in Heiligendamm, Germany, next week, where Russia’s openness to investment is likely to be a matter of discussion. Still, draft minutes for the closed meeting of the committee on subsoil resources had recommended stripping the license, Interfax reported, citing a copy of the minutes the news agency had obtained.
A spokeswoman for TNK-BP said the company was not informed of the proceedings – though the committee’s decision will affect a development where BP and partners have invested hundreds of millions of dollars. The company does not reveal the exact figures. „We don’t know even the status,” Marina Dracheva, the spokeswoman, said. „We have zero information at this stage.” Tony Hayward, the BP chief executive, visited Moscow Thursday for talks and left without publicly commenting on their outcome.
Critics say the license is being stripped on a pretext; Russian officials say they are merely sticking to the letter of the contract. The authorities accuse TNK-BP of failing to meet a license requirement to produce nine billion cubic meters of natural gas for the local market in eastern Siberia by 2006. TNK-BP does not dispute it has failed to meet this license provision, but counters that demand for natural gas is now far below this level in eastern Siberia, meaning it is impossible to meet the requirement. The licensing troubles in Russia come as the latest setback for BP. The company came under scrutiny in the United States for a refinery explosion in Texas and a pipeline spill in Alaska. BP pumps a quarter of its worldwide oil output from Russia, through its 50% share in TNK-BP. (iht.com)
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