'Kovykta reclaim will be fair'

12.03.2010

Russia's top energy official Deputy Prime Minister Igor Sechin said today that any decision to strip TNK-BP of its licence for the Kovykta gas field in Siberia should be "fair" and that costs should be compensated.

"There's no talk of any blatant expropriation. I think we will find a solution to this issue," Reuters quoted Sechin as telling reporters.

Sechin also said the government was not yet considering an export duty on potash, and that the issue was in no way linked to a zero export duty on oil from East Siberia.

Russian media reports of the possible introduction of a 15% export duty prompted miner Uralkali to say the introduction of duties "would be misguided".

"It's the first time I've heard about it," Sechin said.

"We are not yet examining this issue. It's in no way linked to the removal of duties in East Siberia."

Analysts have said Russia might be considering a potash duty to help compensate for revenues lost by allowing oil companies to export crude from East Siberian fields free of any duties.

The blanket zero export duty on East Siberian oil, opposed by the Finance Ministry, would continue until the government and industry lobbies had agreed on a new tax regime, Sechin said.

Sechin also sought to reassure TNK-BP , holder of the licence for the Kovykta gas field in East Siberia, that any decision to strip the company of the licence would be fair and that any costs incurred would be taken into account.

"There's no talk of any blatant expropriation. I think we will find a solution to this issue," he said.

TNK-BP, half-owned by BP , is involved in a decade-old dispute over Kovykta, which escalated last month when environmental watchdog RosPrirodNadzor recommended the company be stripped of the licence.

"I don't think the issue is so acute," Sechin said. "The expenses incurred must be taken into account."

Analysts have said the Kovykta dispute underlines the risks of doing business in Russia, but that a decision to revoke the licence would have a limited share impact as all negative developments have been priced in a long time ago.

Some Russian officials have said TNK-BP failed to follow obligations outlined in its licence for Kovykta, including the launch of full-scale production.

Source : Upstreamonline