07MOSCOW2601, RUSSIAN ENERGY: KOVYKTA UPDATE

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Reference ID Created Released Classification Origin
07MOSCOW2601 2007-06-04 03:17 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO3872
OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHMO #2601 1550317
ZNY CCCCC ZZH
O 040317Z JUN 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0837
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 4241
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 1114
RHEHNSC/NSC WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L MOSCOW 002601 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/RUS WARLICK, HOLMAN, AND GUHA 
DEPT FOR EB/ESC/IEC GALLOGLY AND GARVERICK 
DOE FOR HARBERT/EKIMOFF 
DOC FOR 4231/IEP/EUR/JBROUGHER 
NSC FOR KLECHESKI 
 
E.O. 12958: DECL: 06/01/2017 
TAGS: EPET ENRG ECON PREL RS
SUBJECT: RUSSIAN ENERGY: KOVYKTA UPDATE 
 
REF: MOSCOW 2563 
 
Classified By: Econ M/C Quanrud.  Reasons 1.4 (b/d). 
 
1. (C) June 1 has come and gone in Russia without the 
withdrawal of Rusia Petroleum's license to develop the giant 
Kovykta gas field.  Interfax reports that Rosnedra, the GOR 
agency charged with license compliance oversight, has 
prepared a draft protocol confirming that Rusia Petroleum -- 
the holder of the license and majority-owned by TNK-BP -- did 
violate the license terms.  The draft recommends license 
revocation.  Rosnedra postponed making a decision about the 
license for another two weeks. 
 
2. (C) Senior TNK-BP management tells that the GOR backed 
away from doing anything as precipitous as a license 
withdrawal, especially in light of next week's G-8 Summit in 
Germany and this year's high-profile Russian Economic Forum 
in St. Petersburg immediately following the G-8.  TNK-BP 
believes that the fear of bad publicity has likely bought the 
company a few weeks breathing room. 
 
3. (C) Beyond the battle over the license, TNK-BP and its 
partners in the field are still actively working on a deal 
that will leave them with a 49 percent stake in the venture, 
ceding 51 percent to Gazprom.  It appears that the May 31 
meeting between Gazprom CEO Alexey Miller and BP Chairman 
Tony Hayward brought the two sides closer, but we understand 
that haggling continues over Gazprom's buy-in price.  There 
are rumors that President Putin would like to see this deal 
closed, and on terms that do not cause a public outcry, 
before he gets on the plane for Germany next Tuesday. 
 
4. (C) TNK-BP believes that the terms of this deal (which are 
better than the firm had expected) are being driven by 
Gazprom's desire to push back on the growing perception 
within the Kremlin (including Putin) that Gazprom is 
operationally ineffective.  At a meeting with oil executives 
this week in the Kremlin, Putin is reported to have pointedly 
called into question Gazprom CEO Miller's contribution in the 
discussion, to the surprise of many of the participants. 
 
5. (C) Comment. The pace and level of the discussions 
surrounding the Kovykta field suggest that a deal may indeed 
be at hand, and that real money is being put on the table. 
Likewise, it appears that the question of the license 
revocation may be on hold for a while. End Comment. 
BURNS

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