Russia has threatened to withdraw the production licence for one of BP’s biggest projects, reviving concerns over the security of investing in the country.
Yuri Trutnev, the Russian Resources Minister, told reporters that the Government was unhappy that BP’s joint venture in the country, TNK-BP, had failed to build a local pipeline network. TNK-BP has instead proposed a major supply link to China.
The Resources Ministry was to “review the possibility” of, within a month, withdrawing the production permit for the Kovykta gas field, BP’s biggest project in a country which holds one-third of global gas reserves.
While BP has yet to comment on the threat, analysts said that Mr Trutnev’s stance may reflect pressure from Gazprom, the Russian state gas giant, which has a stake in the Kovykta project.
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Adam Landes, the Renaissance Capital analyst, told Reuters: “Gazprom is playing hardball because it can afford to.”
Steven Dashevsky, an analyst at Aton brokerage, said that the permit threat may also reflect continued Government disappointment at hiccups to the project.
“We’re getting to the point where the Russian government is getting more concerned. I don’t think the licence will be withdrawn, but it is a clear sign they have to shape up and accelerate development of the field.”
The dispute threatens to revive fears over investment in Russia after a bank crisis two months ago, the tax battle which has driven Yukos near to collapse and amid a rising terror threat. In the first half of 2004, $5.5 billion fled Russia, according to official data, with some analysts predicting the figure could reach $17 billion by the end of the year.
Société Générale and ING have recently pulled out of a group of banks arranging a $600 million syndicated loan to TNK-BP. HSBC has decided to withdraw from an unsecured $500 million syndicated loan to the Russian metals giant, Norilsk Nickel.