BULA Resources plc has been threatened with the breaking off of negotiations by its Russian partners if it cannot produce a person to represent the mystery companies Mir Space International and Mir Oil Development.

The Russian company, KMNGG, is involved with Bula and Mir Space in the Salymskoye oil fields in Siberia. Bula has already spent more than £7 million on the development of the fields.

However, the Bula involvement with the oil fields is by way of its purchase of a share in Mir Space, which has a contract with KMNGG. The identity of the beneficial owner of Mir Space and Mir Oil, two companies registered in the British Virgin Islands, remains a mystery.

Now the Russians are saying there is no point in their negotiations with Bula, as their contract is with Mir.

The Russians believe they can find new sources of funds for developing the oil field.

The former chairman of Bula, Mr Jim Stanley, who was central to setting up the Bula/Mir/ KMNGG deal, was in Moscow this week and held a meeting with the former general manager of KMNGG, Mr Vladimir Tokarev, who was also central to negotiating the deal.

According to one source, Mr Stanley said he could produce the beneficial owner of the Mir companies.

KMNGG believes that it should only continue negotiations if someone is produced who can show proof that they have the power to represent the Mir companies.

At the time it negotiated the deal, KMNGG believed the Mir companies were set up by Bula for tax reasons, according to Mr Nikolai Bogachev of KMNGG. However, Bula believed that the Mir companies belonged to a Mr Charles Ellis, of South Africa. The company now no longer believes that to be the case.

A Government inspector, barrister Mr Lyndon McCann, has been appointed to investigate matters connected with the Salymskoye deal, including the beneficial ownership of the Mir companies.

Mr McCann is also investigating what led to incorrect results from a test well in Salymskoye being announced in October 1996.

The announcement said the well produced 942 barrels of oil per day, but in fact the results showed insignificant amounts of oil.

It is understood that some technical staff who worked on site said oil was actually poured into the well and photographs taken showing flames shooting up over the rig. However, independent sources said the pouring of oil into a well can be a legitimate production technique.