BP 2007 Annual Report Download - page 26

– The Yacheng offshore gas field (BP 34.3%) supplies, under a long-
term contract, 100% of the natural gas requirement of Castle Peak
Power Company, which provides around 50% of Hong Kong’s
electricity. Some natural gas is also piped to Hainan Island, where it is
sold to the Fuel and Chemical Company of Hainan, also under a long-
term contract.
– In March, the National People’s Congress reduced the rate of
corporation tax from 33% to 25% with effect from 1 January 2008.
Australia
– In Australia, BP net gas production in 2007 was 376mmcf/d, an
increase of 3.3% from 2006 due to increased domestic gas demand in
Western Australia. BP net liquids production at 34mb/d remained
unchanged from 2006.
– BP is one of seven partners in the North West Shelf (NWS) venture.
Six partners (including BP) hold an equal 16.7% interest in the
infrastructure and oil reserves and an equal 15.8% interest in the gas
and condensate reserves with a seventh partner owning the
remaining 5.32% of gas and condensate reserves. The operation
covers offshore production platforms, an FPSO, trunklines and
onshore gas processing plants. The NWS venture is currently the
principal supplier to the domestic market in Western Australia. During
2007, progress continued on the construction of a fifth LNG train
(4.7 million tonnes per year design capacity), with first throughput
expected in the second half of 2008.
Russia
TNK-BP
– TNK-BP, a joint venture between BP (50%) and Alfa Group and
Access-Renova (AAR) (50%), is an integrated oil company operating in
Russia and the Ukraine. The TNK-BP group’s major assets are held in
OAO TNK-BP Holding. Other assets include the BP-branded retail
sites in Moscow and the Moscow region and interests in OAO Rusia
Petroleum and the OAO Slavneft group. The workforce comprises
more than 60,000 people.
– BP’s investment in TNK-BP is held by the Exploration and Production
segment and the results of TNK-BP are accounted for under the
equity method in this segment.
– TNK-BP has proved reserves of 6.9 billion barrels of oil equivalent
(including its 49.9% equity share of Slavneft), of which 4.5 billion are
developed. In 2007, TNK-BP’s average liquids production was
1.7mmboe/d, a decrease of just over 5% compared with 2006,
reflecting the disposal of the Udmurt asset in 2006. The production
base is largely centred in West Siberia (Samotlor, Nyagan and
Megion), which contributes about 1.2mmboe/d, together with Volga
Urals (Orenburg) contributing some 0.4mmboe/d. About 44% of total
oil production is currently exported as crude oil and 19% as refined
product.
– Downstream, TNK-BP has interests in six refineries in Russia and the
Ukraine (including Ryazan and Lisichansk and Slavneft’s Yaroslavl
refinery), with throughput of approximately 35 million tonnes per year.
During December 2007, TNK-BP agreed to purchase additional retail
and other downstream assets in Russia and the Ukraine from a
number of small companies with completion due in 2008. TNK-BP
supplies approximately 1,600 branded filling stations in Russia and the
Ukraine and, with the additional sites, is expected to have more than
20% market share of the Moscow retail market.
– In January 2007, TNK-BP announced the purchase of Occidental’s
50% interest in the West Siberian joint venture, Vanyoganneft, for
$485 million. The transaction closed during the first quarter of 2007
and TNK-BP now owns 100% of the Vanyoganneft asset.
– On 22 June, BP and TNK-BP signed heads of terms to create strategic
business alliances with OAO Gazprom. Under the terms of this
agreement, TNK-BP agreed to sell to Gazprom its 62.89% stake in
OAO Rusia Petroleum, the company that owns the licence for the
Kovykta gas condensate field in East Siberia and its 50% interest in
East Siberia Gas Company (ESGCo). BP and TNK-BP have an option to
repurchase on market terms up to 25% + 1 share in OAO Rusia
Petroleum and up to 25% of ESGCo in the event that a strategic
business alliance is subsequently established with OAO Gazprom.
– In November 2006, following a review of the results of an inspection
by the licensing authorities that had resulted in a request for the
revocation of the two licences held by TNK-BP subsidiary Rospan
International, an agreed rectification plan was put in place. All the
Rospan licence compliance issues arising from the inspection by the
licensing authorities in 2006 are now substantially resolved.
Sakhalin
– BPparticipatesintheKVlicenceareainoffshoreSakhalinwhereit
conducts exploration activities through Elvaryneftegas (BP 49%), an
equity-accounted joint venture with Rosneft. Two discoveries have
been made to date in the KV licence area. BP also participates in joint
operations in two licence areas with Rosneft in East and West Shmidt
(BP 49%).
– Exploratory drilling continued in 2007 with the drilling of two wells in
the West Shmidt licence area. Both wells were found to be dry and,
as a result, BP wrote off all expenditures related to the West Shmidt
licence area.
– The 2008 work programme for the Sakhalin licence includes seismic
re-processing in the East Shmidt licence area and a 2D seismic
acquisition programme in the KV licence area. No drilling is planned
for 2008.
Other
Azerbaijan
– In Azerbaijan, BP net production in 2007 was 218mboe/d, an increase
of 50% from 2006 due to the ramping up of three Azeri oil producing
platforms and the Shah Deniz condensate gas platform commencing
production in 2007.
– BP, as operator of the Azerbaijan International Operating Company
(AIOC), manages and has a 34.1% interest in the Azeri-Chirag-
Gunashli (ACG) oil fields in the Caspian Sea, offshore Azerbaijan.
Phase 3 of the project, which will develop the deepwater Gunashli
area of ACG, remains on schedule to begin production in 2008 with
platform topsides having been completed in September 2007.
– BP is the operator of Shah Deniz (BP 25.5%), which is in the
Azerbaijan sector of the Caspian Sea and will deliver gas to markets in
Azerbaijan, Georgia and Turkey. First gas to Turkey was achieved in
July 2007. Production from the field is expected to continue to ramp
up as further wells are brought onstream. Plateau production from
Stage 1 is expected to be 6.9 billion cubic metres of gas per annum
and approximately 30,000 barrels of condensate per day.
– In November, we announced a further major new gas-condensate
discovery in the Shah Deniz field in the Caspian Sea. The SDX-04
exploration and appraisal well, some 70 kilometres south-east of Baku,
discovered a new deeper structure below the currently producing
reservoir. Drilled to a Caspian-record depth of more than 7,300 metres
in the south-western part of Shah Deniz, the well encountered gas
condensate in the main target horizons extending the field to the
south. The well also discovered a new high pressure reservoir in a
deeper structure.
Middle East and south Asia
– Production in the Middle East consists principally of the production
entitlement of associates in Abu Dhabi, where we have equity
interests of 9.5% and 14.7% in onshore and offshore concessions
respectively. In 2007, BP’s share of production in Abu Dhabi was
192mb/d, down 3% from 2006 as a result of a major planned
maintenance shutdown in the offshore concession in the fourth
quarterof2007.
– In Pakistan, BP doubled its equity in the onshore Badin asset (BP
84%) as part of an international asset exchange with Occidental. As a
result of this transaction, BP net oil production in 2007 was
6.3mboe/d, an increase of 24% from 2006, and BP net gas production
was 122mmcf/d, an increase of 39.4% from 2006.
– In the third quarter of 2007, BP signed a farm-in agreement with
Petroleum Exploration (Private) Limited to obtain a 33% participating
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