Embattled BP's Russian affiliate sees profits soar

27th July 2010, Comments 0 comments

TNK-BP, the Russian joint venture of BP and one of its crown jewels, revealed soaring profits on Tuesday as it emerged that outgoing BP chief Tony Hayward is to become a director at the firm.

TNK-BP -- jointly owned 50 percent by the embattled oil giant and 50 percent by a group of Russian billionaires -- said first-half profits jumped more than 20 percent to 2.4 billion dollars (1.86 billion euros) on rising production.

The results underlined the profitability of TNK-BP, Russia's third-biggest oil firm, on the day its British parent announced a loss of 16.9 billion dollars in the second quarter of 2010 after the Gulf of Mexico oil spill.

BP also announced on Tuesday that as a part of the management reshuffle prompted by its oil spill the widely-mocked Hayward would be nominated as a non-executive director of TNK-BP.

"During the first six months of 2010, TNK-BP continued the track record of strong operating and financial performance," said one of its Russian owners, billionaire Mikhail Fridman, who is acting TNK-BP chief executive.

"This is the 11th successive quarter of production growth, supported by continued development of new projects in West and East Siberia.

"This set of results once again confirms the company's growth potential going forward," he added.

Revenues for the first half rose to 20.7 billion dollars from 14.5 billion the year earlier. Net profits rose to 2.4 billion dollars from 2.0 billion in the same period last year.

For the second quarter in 2010, net profits were 1.16 billion dollars, it said.

Oil and gas production in the first half of 2010 increased by 4.5 percent to 1.743 million barrels of oil equivalent per day (boed) compared to the first half of 2009.

TNK-BP operates huge oil fields in East Siberia, West Siberia and the Volga-Urals region. Over the last year it has ramped up production at key fields like Uvat and Verkhnechonsk.

TNK-BP was hit by a major management dispute in 2008 that threatened the future of the joint venture when its then chief executive Robert Dudley was accused of damaging the Russian shareholders' interests.

However the dispute was patched up after Dudley's departure and the shareholders agreed to appoint Maxim Barsky TNK-BP chief executive effective from 1 January 2011, with Fridman taking the reins in the interim.

Ironically, BP announced on Tuesday that Dudley would be replacing Hayward as the overall BP chief executive.

But a source close to Russian co-shareholders, known collectively as Alfa Access-Renova (AAR), told the Vedomosti daily they had no problem with the appointment of Dudley as chief executive.

"It (the 2008 dispute) was not a personal conflict but a conflict of shareholders. And it's over."

Late last month Deputy Prime Minister Igor Sechin, the government's pointman on energy matters and close ally of Prime Minister Vladimir Putin, met Hayward in Moscow for a meeting whose subject remained a mystery.

Hours before the meeting, Sechin publicly announced that Hayward was resigning and it remains unclear if the powerful Russian energy supremo was misinformed or had leaked confidential information.

There has been speculation that BP could even sell its stake in TNK-BP, a move that would rake in an estimated 15 billion dollars in proceeds and at single stroke improve its financial situation.

Analysts have said the Russian gas giant Gazprom and its largest oil firm Rosneft would be interested purchasers but TNK-BP has dismissed such a scenario.

© 2010 AFP

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