June 1, 2007 / 7:21 AM / in 10 years

Russia to decide TNK-BP's Kovykta fate on Friday

<p>A BP logo is seen in a file photo. BP Plc's Russian venture is likely to lose its license for the giant Kovykta gas field on Friday, although Moscow could postpone the tough action until after the G8 Summit and its landmark economic forum. REUTERS/Kieran Doherty</p>

MOSCOW (Reuters) - BP Plc’s Russian venture is likely to lose its license for the giant Kovykta gas field on Friday, although Moscow could postpone the tough action until after the G8 Summit and its landmark economic forum.

The state licensing agency is due to meet at around 0800 GMT to review the issue.

“We believe the delay in a final decision is plausible, but ultimately the license is likely to be recalled,” said Steven Dashevsky from Aton brokerage.

The Vedomosti daily newspaper quoted on Friday a source close to TNK-BP as saying that the licensing agency, Rosnedra, might postpone its decision on Kovykta until the end of the Russian Economic Forum in St Petersburg on June 10.

If the license is withdrawn this week the Kovykta issue may also emerge high on the agenda of the G8 summit to be held on June 6-8 in Germany.

The protracted battle for the $20-billion Kovykta, which has enough reserves to supply the world with gas for almost a year, is seen by many analysts as part of a Kremlin drive to consolidate major energy resources under state control.

Russia’s environmental agency RosPrirodNadzor (RPN) earlier this year accused TNK-BP of underproduction at the field.

The firm had hoped to use the field for gas exports to China but was forced to trim production to cover only local needs after gas export monopoly Gazprom banned the plan as it has its own rival project to supply China.

Gazprom chief Alexei Miller and BP Chief Executive Tony Hayward met on Thursday, but gave little information other than to say they discussed working together in the European, U.S. and Russian energy markets.

TNK-BP has repeatedly tried to rescue the project by ceding control to Gazprom, but the latter has said it was not interested in the field as the project was risky.

“Even though the chances for a precedent-setting license repeal... are high, we still hope that TNK-BP and Gazprom can find a last minute solution,” said Oleg Maximov from Troika Dialog.

For key facts on Kovykta, click on.

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