Russia may revoke BP gas licence

The Kovytka field is estimated to hold 2 trillion cubic metres of gas

The Russian government has said it may revoke UK oil major BP's licence to exploit the giant Kovytka gas field.

Resources minister Yuri Trutnev said the licence may be withdrawn because BP and Russian partner TNK had failed to build a local pipeline network.

The Kovytka field in Siberia, thought to hold 2 trillion cubic metres of gas, is BP's biggest Russian project.

Analysts said the move may be aimed at securing a bigger role in the Kovytka project for Russian gas firm Gazprom.

Deadline

Gazprom's current involvement is limited to marketing the gas extracted from the Kovytka field, but it is thought to be keen to participate on the production side.

We have never received any formal notification of irregularities TNK-BP spokeswoman

The company is 38% owned by the Russian state.

"Gazprom is trying to muscle into the full cycle," said Adam Landes, oil analyst at Renaissance Capital.

Mr Trutnev told the Reuters news agency that officials will review the Kovytka licence - held by TNK-BP, a joint venture between the two companies - within a month.

A spokeswoman for TNK-BP said the company had not been contacted directly by the Russian authorities.

"We have never received any formal notification of irregularities in the licence conditions," she told BBC News Online.

"We are fully committed to the domestic side of the project, and are going ahead as planned."

Investor worries

TNK-BP is scheduled to start delivering gas from Kovytka to the Russian market by 2006.

It is also in talks over a possible supply deal to China and South Korea, which would take effect in 2008.

BP shares closed 0.75p higher at 409.25p in London.

The threat to withdraw the Kovytka licence is likely to stir fresh fears among foreign investors over government intervention in Russia's lucrative oil and gas sector.

Concerns on this front have been heightened by the Kremlin's aggressive investigation into the tax affairs of Russian oil giant Yukos.

Analysts believe Yukos may be forced to sell its key Siberian oil unit - possibly to a state-backed oil firm - in order to settle a multi-billion dollar tax demand.

There has been speculation that some officials want the government to exert more control over Russia's lucrative natural resources sector, much of which was sold off in rushed privatisation deals during the early 1990s.