TNK-BP Estimated Its Investment Program

October 23, 2009

Last year, when the oil barrel cost approximately $40, TNK-BP was the most circumspect company that based its investment program on an average price of $35 per barrel. The whole year of growing oil prices imbued optimism into the management of the Russian-British consortium. Jonathan Muir, Chief Financial Officer of TNK-BP, said that the company worked out a business plan for 2010 based on an oil price of $60 per barrel and an exchange rate of 33 rubles per dollar. Accordingly, TNK-BP is going to increase the volume of its investment program.

“In general, TNK-BP is a careful and prudent company that never takes unjustified risks. Despite the fact that the oil prices kept growing all last year, TNK-BP decided to proceed from conservative estimates and base its investment program on prices lower than current oil prices,” said Valery Nesterov, analyst of Troika Dialog, to Vremya Novostei.

This year, the investment program volume will continue to grow. First, the company estimated its capital investments in 2009 at $3 billion. However, the  positive business environment and success of several projects helped the Board of Directors of the company enlarge the investment program. In summer, capital investments were increased by $500 million. Last week, the Board of Directors extended the investment program up to $4 billion. “Investments in 2010 will be approximately $3.5–4 billion higher than in 2009,” said Mr. Muir and admitted that the company still has “maneuvering space” as capital investments will still grow this year.

The Chief Financial Officer emphasized that “capital investments mean comprehensive financial support of production, exploration, modernization of oil refineries, increased utilization of associated petroleum gas, and much more.” In particular, TNK-BP will continue works for development of its fields in the Yamal Peninsula and Central Uvat region and modernization of its refining facilities to meet the requirements of the new technical regulation that will be enforced in 2011.

Apart from that, TNK-BP will have to invest into older fields to maintain the production level in them. Experts agree that this will be a key task for the company trying to build up its production. “Our goal is to maintain production in older fields and develop new projects,” said Mr. Muir. It should be mentioned though that TNK-BP is going to increase its production gradually and slowly – by 1–2% a year. “Maintaining the level of production in older fields is the one of the most important task for TNK-BP. New projects, such as the Verkhnechonskoe field project and Uvat project, produce little oil so far and cannot compensate for the decline of oil production in the traditional regions. For this reason, TNK-BP has to continue development of the Samotlor field and fields in the Orenburg Region,” holds Mr. Nesterov.

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