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Russian watchdog says Total fails to fulfill licensing agreement

MOSCOW, March 22 (RIA Novosti) - Russia's environmental and technological watchdog said France's Total oil company has failed to meet terms of a licensing agreement on a lucrative oil field in northern Russia.

The regulator, which launched a second probe into Total's compliance with technological and environmental requirements at the Kharyaga oil field March 12, said the license could be revoked.

"The Federal Service for the Oversight of Natural Resources has conducted a repeat check and established that Total has corrected none of the violations," said Sergei Fyodorov, who is in charge of geological development and mineral resources management in the Natural Resources Ministry.

Late last year, the regulator initiated license revocation discussions on Kharyaga after discovering that the operator had failed to follow field development recommendations, including the gas drive recovery process, burning up 60% of the natural gas produced in 2005.

"The company has violated the technical agreement and failed to meet production targets, and it does not properly dispose of gas but burns it off," Fyodorov said, adding that the materials of the inspection would be submitted to a commission for early license revocation.

In April, the Natural Resources Ministry accused Total of failing to increase production of crude and introduce new technologies and equipment for effective production since the 1995 production-sharing agreement (PSA) came into force in 1999.

Total owns a 50% stake in the project, alongside Norway's Hydro (40%) and Russia's Nenets Oil Company (10%).

The Kharyaga field, with total reserves of 160.4 million metric tons, is one of three production-sharing agreements in Russia. The other two are Sakhalin I and Sakhalin II.

This month, an inspection into alleged environmental violations will begin on the Sakhalin I oil and gas project off Russia's Pacific coast, operated by U.S. oil giant ExxonMobil.

Months of pressure last year on another vast hydrocarbon project in the Far East, Sakhalin II, regarded by experts as the Kremlin's drive to regain control of the country's mineral resources, culminated in the purchase by state-controlled energy giant Gazprom of 50% plus one share in the project from Shell and other companies involved.

Another hydrocarbon operator in Russia, TNK-BP, received a warning from Russian authorities in early February that it could be stripped of its license for the giant Kovykta natural gas deposit in East Siberia over failure to meet its obligations to supply nearby areas with gas. The Russian-British joint venture was given three months to rectify the situation.

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