Hungary MOL to resolve ZMB gas issue with Russneft this week - paper

Portfolio.hu

Wednesday, August 5, 2009 08:45:00 AM

Hungarian fuels group MOL is currently in talks with a delegation of Russia's Russneft in Budapest. The parties may reach an agreement about the utilisation of associated gas at their jointly-owned oil field ZMB already this week, local business daily Világgazdaság reported on Wednesday.

The paper said the parties may find a solution to the pressing issue by the end of the week. MOL spokeswoman Dóra Somlyai has confirmed that there are talks between the two companies, adding that reconciliation is continuous.

Bloomberg learned that officials of the two companies are presently in Budapest.

On July 2 Russia's subsoil agency, Rosnedra, gave the Zapadno-Malobalykskoye LLC oil venture, held jointly (50-50%) by MOL and Russneft, six months to correct violations relating to its drilling plant and its use of so-called associated gas, threatening to revoke their permit if they fail to comply.

Tensions between MOL and the Russian government have increased since Moscow-based OAO Surgutneftegaz bought a 21.2% share in MOL from Austria's OMV in March. MOL called the move hostile and has still not allowed the Russian company to participate in corporate meetings.

MOL did not participate in a board meeting called by the ZMB project company for 20 July, where the parties would have tackled the issue of a new gas-fuelled power plant. MOL said it did not go to the BoD meeting as it had not been convened by the Chairman of the Board as it should have been.

The meeting was called to vote on investing in a new gas-fired power station that would not only provide the facility with electricity, but also allow making use of the so-called associated gas that is produced in conjunction with crude oil, rather than burning it off.

Investing in the 800 million-rouble (cc. USD 25.25 million), 16-megawatt plant is the group's “best option," considering the time constraints, Larisa Kalacheva, a spokeswoman for Russneft told Bloomberg in an e-mail in late July.