Russia's environmental watchdog has demanded the revocation of LUKoil's licenses for 21 oil extraction sites in the Northwest Urals and West Siberia over serious infringements of environmental regulations uncovered during checks.
Maxim Shein, head of research at BrokerCreditService investment, suggested that environmental probes into LUKoil and state-controlled oil company Rosneft [RTS: ROSN] "are designed to demonstrate to the public that charges could also be brought against Russian companies."
Russia's environmental authorities have been stepping up pressure on oil producers. In September, the Natural Resources Ministry withdrew a key permit for the huge Shell-led Sakhalin II oil and gas project in Russia's Far East, being implemented under a product-sharing agreement dating back to 1994.
In late September, the ministry also announced planned probes into another PSA agreement - the Kharyaga deposit in northern Russia, implemented by French oil major Total, and the Kovykta gas project in East Siberia, developed by Anglo-Russian joint venture TNK-BP.
"We believe the company will be able to resolve the dispute with the authorities in this case," Shein said, adding that LUKoil had already pledged to deal with the violations at the sites by a deadline announced by the ministry.
"The company will make all possible efforts to deal with environmental violations by the set deadline," LUKoil said Friday.
The expert suggested that even the revocation of some licenses will have only an insignificant impact on the company, which has at least 20% of its deposits still undeveloped.
LUKoil is currently exploring and producing oil and natural gas at 406 licensed sites in Russia, and 17 sites abroad.
Echoing this opinion, Dmitry Golubkov, an analyst at Aton-Line Internet trader, said experts have not treated the threat by the Federal Service for the Oversight of Natural Resources to revoke licenses as a serious one for the oil giant.
"Conflicts like this erupt from time to time for most of our oil firms," said Alexander Potavin from NetTrader.ru. "But LUKoil has pledged to deal with the violations promptly."
Deutsche UFG experts said the checks of LUKoil and possibly of other Russian oil and gas producers in the future should be seen in the context of authorities' crackdown on PSA projects.
Three vast hydrocarbon projects have been implemented in Russia under PSA agreements: Sakhalin II led by the Anglo-Dutch giant, another Far Eastern project Sakhalin I run by the U.S.' Exxon Mobil, and the Kharyaga deposit operated by Total.
Devised in the 1990s when oil prices were much lower, PSAs offer investors major tax benefits, which provided a kind of risk bonus for investing in Russia. Under PSAs, Russia will also start receiving its share of profits only after investors have recovered their costs.
