Russia Considers Flexibility in Mining License Conditions

Posted by

Jul. 23 – The Ministry of Environmental Protection and Natural Resources has proposed that companies be given the option to change conditions in their licenses to allow them to cut extraction volumes.

This measure will allow companies struggling with low raw material demand to reduce extraction without the fear of losing their licenses, Russian daily Vedomosti reports. The amendment to federal law allowing companies to enter changes into their license agreements has already been published on Ministry of Environmental Protection and Natural Resources web site.

Currently, the license agreement specifies deposit borders, input, conditions of payments, and volume of raw material extraction.

“When the company does not fulfill one of the conditions, the license can be withdrawn,” a ministry official said. “At the same time, in crisis circumstances it becomes difficult for mining companies to carry out their own plans due to changes in the market situation.” He added, “We face a choice: either to withdraw number of mining licenses, or change the legislation.”

The most famous instance of license withdrawal in the country is the case of Kovykta natural gas deposit with stocks of 2 billion cubic meters, owned by TNK-BP affiliated company, Rusia-Petrolium.

In the late 1990s,  when Russia acquired the rights to develop Kovykta, the  construction of pipeline for fuel delivery from Russia to China or Korea was supposed to be initiated by state-run Gazprom. Due to unforeseen circumstances, extraction in Kovykta in 2006 did not exceed 40 million cubic meters per year contrary to license conditions that required 9 billion cubic meters of extraction annually.

TNK-BP and its affiliate company asked Russian authorities to change the license agreement but officials refused. In June 2010, Rusia-Petrolium was forced to declare bankruptcy. “The last initiative of the MEPNR will not affect destiny of the Rusia, because the bankruptcy procedure is ongoing”, TNK-BP official said to Vedomosti.

Leave a Reply

Your email address will not be published. Required fields are marked *