INTERVIEW: Russian watchdog warns of bogus oil reserves

NEW YORK, Sept 5 (Reuters) – Several foreign oil and mining companies operating in Russia have been overstating reserves by as much as 800 percent, the deputy head of Russia’s environment watchdog said on Wednesday.

“This is a new kind of business that has unfortunately appeared to have started in Russia,” Oleg Mitvol told Reuters in an interview. “There is no Russian legislation that has been broken. All we are saying is ‘be careful’.”
Mitvol, who led a high-profile attack on the $22 billion Royal Dutch Shell-led Sakhalin-2 energy project last year, said Russia was getting a bad reputation for cracking down on what he called irresponsible behaviour by foreign firms.

Among his targets are Imperial Energy Corp , which he said overstated its oil reserves by 800 percent, and Highland Gold Mining Ltd. , which failed to produce gold from its Mayskoye deposit in 2006 as its license required.

Mitvol was visiting analysts with several banks in the United States who hold investments in companies operating in Russia, warning them about the dubious reserve accounting methods.

Oil companies have turned to using suspect, unverifiable seismic measurements to convince investors they hold valuable oil deposits, Mitvol said.

“A lot of these companies exist only virtually, so to speak, on their (Internet) space,” Mitvol said. “It is sad but it is true that Russia often times has to explain and apologize. That is just a historical legacy of ours.”

Reuters AlertNet