WHITE NIGHTS CONFIDENT OF RUSSIAN LAWSUIT OUTCOME

The White Nights joint venture n is confident it can resolve a Russian legal challenge to the JV's right to develop oil and gas in western Siberia. At issue is the validity of a license awarded White Nights partners in late 1990 by the finance ministry of the former Soviet Union to develop West Varyegan, Tagrin, and Roslavl fields in the Tyumen region.

June 13, 1994

2 min read

The White Nights joint venture n is confident it can resolve a Russian legal challenge to the JV's right to develop oil and gas in western Siberia.

At issue is the validity of a license awarded White Nights partners in late 1990 by the finance ministry of the former Soviet Union to develop West Varyegan, Tagrin, and Roslavl fields in the Tyumen region.

An association representing Russian ethnic groups charged in a Moscow court that the government issued White Nights' development license without conducting a competitive tender and terms of the agreement encroach on the property rights of Tyumen natives.

The Moscow Court of Arbitration in late May ruled the license invalid. Only Russia's state geological committee - not White Nights or any of its partners is named in the court action. Defendants in the case have retained new counsel and are preparing an appeal, which must be lodged by the end of this month.

White Nights officials say JV operations have not been affected by the legal action.

RULING REVERSAL LIKELY

While unfamiliar with Russian legal priorities, an official of Anglo Suisse Inc., Houston with Phibro Energy Inc., Greenwich, Conn., White Nights' western partners said it is unlikely the Moscow court's finding will be upheld.

The requirement that rights to develop Russia's natural resources can be awarded only by competitive tender did not become law until passage about 2 years ago of Russia's law on underground resources. White Nights' license was approved in November 1990, and the JV began operating in West Varyegan in 1991.

If the Moscow court's finding is upheld by a higher court, White Nights is committed to finding a solution that will allow development and production to continue.

"In the final analysis," the Anglo Suisse official said, "I would guess parties to the action are looking for some kind of compensation or participation in the venture. They are after a piece of someone's pie. That's not to say it would be from the western side."

Given recent speculation about the easing of Russian export and excise taxes on oil, observers say the Russian government is likely to move quickly to defuse the conflict.

The reasoning, as one put it "With a little light finally beginning to show at the end of the tunnel, do Russian leaders at this point want to be perceived as being injudicious?"