Russia approves TNK-BPS Kovykta drilling programme

Russia approves TNK-BPS Kovykta drilling programme

Russia’s technical standards agency said on Monday it had approved a drilling programme by BP’s Russian venture TNK-BP at the Kovykta gas field, but the decision is unlikely to ease state pressure on the project.

RosTekhNadzor, a part of the Ministry of Natural Resources, said it had approved the plan of Rusia Petroleum, the TNK-BP subsidiary operating the Kovykta licence, to drill 18 production wells and to build a gas processing unit.

The agreement, valid for five years, allows the company to carry out its obligations to supply gas to consumers of the Irkutsk region in eastern Siberia where the deposit is situated, RosTeckhNadzor said in a statement.

TNK-BP was planning to use the $10 billion Kovykta project to supply the Chinese market but the plan was blocked by the gas monopoly Gazprom which had said Kovykta would not be needed for exports until 2015.

Gazprom’s decision has restricted Kovykta’s output to local market needs of no more than 2.5 billion cubic metres a year, down from 9 bcm provided by the licensing agreement, and put the firm under the state pressure due to underproduction.

Russia’s Natural Resources Ministry said last week it had started checks on whether TNK-BP was fulfilling the terms of its agreement.

Russia’s subsoil agency, RosNedra, which is also a part of the ministry and is in charge of giving and withdrawing licences, said last year that Rusia Petroleum could have its licence taken away because it was not producing enough.

Analysts say RosTekhnadzor’s decision to let Rusia Petroleum go ahead with its drilling plan should not be interpreted as a softening of the ministry’s stance on Kovykta.

“RosTekhNadzor is in charge of the technical side of the project and its decisions in favour of the project do not necessarily mean a change in the ministry’s general position,” said Dmitry Lukashov of Alfa-Bank.

Many analysts have interpreted TNK-BP’s Kovykta problems as evidence of mounting Kremlin pressure to allow Gazprom into the project or to force the Russian billionaires who control half of TNK-BP to sell out to a state-controlled firm such as Gazprom.

They have repeatedly said they have no intention of selling.

Kovykta, the biggest field in Eastern Siberia, has reserves of around 1.9 trillion cubic metres, enough to cover world gas demand for around eight months.

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