MOSCOW, May 25 (RIA Novosti) - Russia has warned French oil major Total that action will be taken if the company continues to ignore Russia's interests while working in the north of the country, the Ministry of Natural Resources said Thursday.
The world's fourth largest oil and gas company operates sites II and III at the Kharyaginsk deposit, a project which has so far received investment of $450 million with another $800 mln expected for the next phase, in Siberia's Yamal-Nenets Autonomous Area through its Russian arm, Total Razvedka Razrabotka Russia.
But the ministry said in a news release citing experts that the company was failing to hit production targets and replace extracted oil with water.
"It is our opinion that Total Razvedka Razrabotka is operating at the Kharyaginsk deposit in breach of Russian laws, and the agency will have to resort to tough measures if the company fails to rectify the violations," the release said.
A production sharing agreement on the Kharyaginsk deposit, which has proven reserves of 57 million metric tons of oil (420 million bbl) was signed between the Russian government, the local administration, and Total's Russian arm in 1995 and came into force on January 1, 1999, for a term of 20 years.
Ministry experts said they were concerned about constantly growing capital and maintenance costs at the Kharyaginsk field, which are much higher than those of Russian companies at geologically identical deposits.
"Substantial discrepancies between the underlying project documents for developing the Kharyaginsk deposit and the actual activities of Total Razvedka Razrabotka Russia remain," the ministry said.
Sites II and III pose major engineering difficulties for many reasons, including the high freezing point of the oil and the high levels of hydrogen sulfide and associated gas.
According to the ministry, the company has not been using water to replace extracted oil and maintain pressure at site III, and at site II has only done this to 30% of the necessary level. It added that Total is producing oil at an efficiency level of under 70%, causing a shortfall of 20-30% under the program agreed with state oil-pipeline company Transneft for crude transit.
The company also plans to burn off 70% of the excess natural gas from the field, instead of pumping it back into the deposit or finding an alternative use for it, which will cause substantial pollution, the ministry said.
Total, headquartered in Paris, has operations in more than 130 countries and average daily production of liquids and natural gas at around 2.6 million barrels of oil equivalent. As well its upstream operations, the company is also involved in refining, marketing, international trading and shipping of oil products.
