Mitvol gives a rating

International auditor of geological reserves DeGolyer & MacNaughton came under suspicion of Rosprirodnadzor

Deputy head of Rosprirodnadzor Oleg Mitvol again started an international scandal. He wrote a letter to the FSB with a request to deal with abuses in the dissemination of unreliable geological information in the field of subsoil use. De facto, according to experts, he intends to raise before the security officers the question of the quality of work in Russia by the American company DeGolyer & MacNaughton (DG&MN), which, together with Miller & Lents, has been assessing the geological reserves of mining companies (including Rosneft) for many years. "Surgutneftegaz" and "Gazprom", as well as YUKOS) according to international standards. In oil and gas circles, it is believed that in this way DG&MN is preparing to evaluate the Kovyktinskoye gas condensate field, which in a month, as it is believed, will somehow begin to be taken away from TNK-BP and given to the management of Gazprom structures. Subsequently, this experience of working with an international appraiser may be useful to officials when assessing reserves and other deposits of large companies.

Mr. Mitvol tried not to focus attention on DG&MN yesterday. So far, he has only announced a black list of foreign companies that have assets in Russia and whose shares are listed on world stock exchanges. This list, according to him, includes structures that “deliberately distort information about their activities in order to increase capitalization.” We are talking about gold mining companies Bema Gold, Celtic Resources Holdings, Trans-Siberian Gold and oil and gas companies Sibir Energy, Victoria Oil & Gas and Urals Energy. Mr. Mitvol’s letter to the FSB, reported by the press service of the Ministry of Natural Resources, states that from 2005 to 2007, a number of foreign companies registered in offshore companies actively declared in foreign media the results of their work in the exploration and production of mineral resources in Russia . “Transactions in the shares of these companies on foreign trading platforms take place solely against the backdrop of regular positive messages coming from the companies themselves or from supposedly “independent” auditors,” the letter says. According to Mr. Mitvol, the management of such subsoil users is not engaged in exploration of reserves, but in playing on the stock market. According to him, at least 70% of the shares of such companies are now listed on world trading platforms. In fact, he argues, the reserves of most of them are either significantly lower than declared or are not proven. And in some cases, such companies own only exploration licenses, and not production licenses, and they were obtained on a non-auction basis. This means that even if the field’s reserves are confirmed during drilling, the company will not be able to produce there.

The reason for the letter was an inspection of the activities of the British oil company Imperial Energy, which in Russia owns three oil production enterprises in the Tomsk region - Nord Imperial, Allianceneftegaz and Sibinterneft. According to Imperial Energy, proven reserves of all three areas amount to 22.44 million tons of oil (159.3 million barrels). According to the DeGolyer & MacNaughton audit, they reached 14 million tons. But according to Rosprirodnadzor, based on the conclusion of the state commission on reserves, oil in category C1 is listed only in the Mayskoye field, and even then in a volume of only 2.6 million tons. At the same time, the Ministry of Natural Resources emphasizes that there are many companies such as Imperial Energy in Russia.

The oil market believes that Mr. Mitvol's game against Imperial Energy is aimed not only at DG&MN. The fact is that on April 29 there will be an auction for the sale of all YUKOS assets in the Tomsk region and neighboring regions. The potential final buyer of which, as usual, is considered to be either Gazprom or Rosneft. Moreover, the fact that the Tomsk and Samara groups of the bankrupt’s assets are in different lots suggests that their buyer will not be the same. Rosneft has expressed interest in the Samara refineries and fields, and the Tomsk fields fit very logically into the structure of Gazprom Neft (or SIBUR, with which Gazprom Neft may sooner or later merge in one form or another). It is quite likely that the future buyer of YUKOS assets is going to “clean up” the Tomsk market, and, of course, he needs to buy out these companies at a low price. Mr. Mitvol, as an official who with one word or action can jeopardize the activities of any foreign company in the field of hydrocarbon production, is quite suitable for this task.

The story with DG&MN, by the way, is very similar to the scandal with PricewaterhouseCoopers, the world's financial auditor. The Federal Tax Service accused him of conspiracy with the audited company YUKOS. As you know, the case went to trial, which ended not in favor of PricewaterhouseCoopers. But after that, Gazprom decided to renew the contract with the auditor, and the Ministry of Finance extended the license (see material on this page) .

However, for now, Mr. Mitvol’s statements look more like an intention to scare everyone with the image of the FSB. Indeed, in order to establish order in the field of reserves, Rosprirodnadzor proposes that security officers “jointly conduct an audit of foreign companies operating in the field of subsoil use that have placed their shares on foreign stock exchanges in the period from 2003 to 2007.” In addition, Mr. Mitvol said that, if necessary, Rosprirodnadzor is ready to provide the London Stock Exchange (LSE) Security Commission with information regarding violations identified in Russia. However, the Ministry of Natural Resources explains rather vaguely why Rosprirodnadzor abandoned its direct responsibilities to monitor the conditions for fulfillment of licenses and send proposals for their revocation to Rosnedra. According to representatives of the ministry, companies engaged in such speculation “do not invest in the development of Russian subsoil,” and the initiative of Rosprirodnadzor will be able to stop such an illegal mechanism for making profit. As for inspections, the central office of Rosprirodnadzor, they say in the ministry, is often faced with the incompetence of local officials responsible for inspections. This was the case with Imperial Energy and the territorial administration of Rosprirodnadzor in the Tomsk region.

But even the set of companies that Mr. Mitvol accuses of publishing incorrect geological data is very strange. Sibir Energy’s reserves, for example, turned out to be really low as a result of the scandalous “erosion” of its share in the Sibneft-Yugra enterprise, which included two fields with a volume of 290 million tons. The trials in this regard, which have been going on for many years, have not yet been completed. Almost all gold mining companies (except Celtic Resources Holdings) positioned themselves more as exploration companies than as producers. In addition, Bema Gold was purchased in February of this year by the Canadian Kinross Gold Corp for $3.5 billion. It is difficult to suspect the latter of speculation and the desire to purchase new assets only in order to increase its ore base: the company conducts active mining, the global volume of which reaches almost 50 tons of gold per year (no Russian company has such results. - Ed. ). In addition, the number of its shareholders is limited, and they are unlikely to be interested in a speculative increase in capitalization instead of a real increase in production. The main gold mining assets of the Irish Celtic Resources Holdings (the South Verkhoyansk mining company that controls the deposit in Yakutia) were sold last year to Interros. Now the company only has exploration copper-gold projects “Mikheevskoye” and “Tominskoye” in the Chelyabinsk region, but reserves there have not been formally approved.

Thus, the claims of Rosprirodnadzor may be justified only in relation to the British Trans-Siberian Gold, which owns licenses for the Kamchatka deposits Asachinskoye and Rodnikovoe and the Krasnoyarsk Veduginskoye and Bogunai deposits. The company indeed several times postponed the start of the launch of the Kamchatka fields, the reserves of which are considered huge. But this was primarily due to the lack of sufficient funding - the fields are considered very difficult in terms of development.

Anna GORSHKOVA, Anna LANDER, Nikolai GORELOV