BP 2006 Annual Report Download - page 27

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, OAO Rusia Petroleum and the
OAO Slavneft group. The workforce is about 70,000 people.
– BP’s investment in TNK-BP is held by the Exploration and Production
business and the results of TNK-BP are accounted for under the equity
method in this segment.
– TNK-BP has proved reserves of 6.1 billion boe (including its 49.9%
equity share of Slavneft), of which 4.8 billion are developed. In 2006,
average liquids production was 1.9mmboe/d, a decrease of just over
2% compared with 2005, reflecting the disposal of the Urdmurt and
Saratov assets in 2006 and 2005. The production base is largely
centred in West Siberia (Samotlor, Nyagan and Megion), which
contributes about 1.4mmboe/d, together with Volga Urals (Orenburg)
contributing some 0.4mmboe/d. About 50% of total oil production is
currently exported as crude oil and 20% as refined product.
– Downstream, TNK-BP owns five refineries in Russia and the Ukraine
(including Ryazan and Lisichansk), with throughput of 0.6 million barrels
a day (28 million tonnes a year). In retail, TNK-BP operates more than
1,600 filling stations in Russia and the Ukraine, with a share of the
Moscow retail market in excess of 20%.
– During 2006, four of TNK-BP’s licences were extended by 25 years,
including two key licences covering the Samotlor field and the
Khokhryakovskoye and Permyakovskoye licences.
– In October, TNK-BP’s subsidiary Rusia Petroleum received a letter from
the Russian authorities alleging a number of violations of the conditions
related to a licence covering part of the Kovykta field in East Siberia.
In February 2007, the status of the licence was reviewed by the
authorities, who we anticipate will issue formal findings shortly. Rusia
Petroleum continues to discuss this matter with the authorities in order
to address any outstanding concerns.
– In November, following a review of the results of an inspection by
the licensing authorities, regional prosecutors made a request for
revocation of the two licences held by TNK-BP subsidiary Rospan
International on grounds of violation of licence conditions and
applicable legislation. Following discussion with the licensing
authorities, renewal was granted of certain documents associated
with the licences for which TNK-BP had previously applied. In addition,
Rospan presented a plan to rectify the licence non-compliances,
following which the licensing authorities have granted a six-month
period to fulfil this plan.
– On 23 October 2006, TNK-BP received decisions from the Russian
tax authorities in relation to the tax audits of certain TNK-BP group
companies for the years 2002 and 2003, resulting in a payment by
TNK-BP of approximately $1.4 billion in settlement of these claims.
At the present time, BP believes that its provisions are adequate for
its share of any liabilities arising from these and other outstanding tax
decisions not covered by the indemnities provided by our co-venturers
in respect of historical tax liabilities related to assets contributed to the
joint venture.
– In August 2006, TNK-BP completed the sale of its interest in OAO
Udmurtneft to Sinopec.
– In January 2007, TNK-BP announced the acquisition of Occidental
Petroleum’s 50% interest in the West Siberian joint venture,
Vanyoganneft, for $485 million. The transaction is expected to close
during the first quarter of 2007, subject to Russian regulatory
approvals. On completion of the purchase, TNK-BP will own 100%
of the Vanyoganneft asset.
Sakhalin
– BP participates in exploration activity through Elvaryneftegas (BP 49%),
an equity-accounted joint venture with Rosneft in Sakhalin, where
three discoveries have been made. Exploratory drilling continued in
2006 and preliminary work is under way to prepare for development
if commercial reserves are discovered. Further drilling is planned
during 2007.
Other
– In July 2006, BP purchased 9.6% of the shares issued in Rosneft’s IPO
for $1 billion. This represents an interest of around 1.4% in Rosneft.
Other
Azerbaijan
– 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 2 of
the Azeri project delivered first oil from the West Azeri platform to
Sangachal terminal on 3 January 2006 and was completed on
21 October 2006 with the delivery of first oil from the East Azeri
platform to Sangachal, four months ahead of schedule. Phase 3 of the
project, which will develop the deepwater Gunashli area of ACG,
remains on schedule to begin production in 2008.
– Construction and the Stage 1 pre-drill programme of the project to
develop the Shah Deniz natural gas field (BP 25.5% and operator) were
completed in 2006, with first gas in December 2006.
Middle East and Pakistan
– 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 2006, production in Abu Dhabi was 164mb/d, up 11%
from 2005 as a result of capacity enhancements.
– In Pakistan, BP is one of the leading foreign operators, producing 22%
of the country’s oil and 6% of its natural gas on a gross basis in 2006.
– In July 2006, BP was awarded three offshore blocks in Pakistan’s
offshore Indus Delta. The blocks cover an area of approximately
20,000km
2
and include the right to operate any commercially
viable discoveries.
– In January 2007, we were awarded development rights to the Khazzan/
Makarem fields in Oman. These provide access to a significant volume
of tight gas resource in place, which we believe can be developed
using the same technology as we are currently deploying at our
Wamsutter field in the US.
India
– In November 2006, BP signed a PSA with the Indian government to
explore for coal bed methane in the Birbhun district of India’s eastern
West Bengal state.
Midstream activities
Oil and natural gas transportation
The group has direct or indirect interests in certain crude oil transportation
systems, the principal ones being the Trans Alaska Pipeline System
(TAPS) in the US and the Forties Pipelines System (FPS) in the UK sector
of the North Sea. We also operate the Central Area Transmission System
(CATS) for natural gas in the UK sector of the North Sea.
BP, as operator, manages and holds a 30.1% interest in the
Baku-Tbilisi-Ceyhan (BTC) oil pipeline, which was fully commissioned in
July 2006. BP, as operator of AIOC, also operates the Western Export
Route Pipeline between Azerbaijan and the Black Sea coast of Georgia
and the Azeri leg of the Northern Export Route Pipeline between
Azerbaijan and Russia.
Our onshore US crude oil and product pipelines and related
transportation assets are included under Refining and Marketing (see
page 27). Revenue is earned on pipelines through charging tariffs. Our
gas marketing business is included in our Gas, Power and Renewables
segment (see page 35).
Activity in oil and natural gas transportation during 2006 included:
Alaska
– BP owns a 46.9% interest in TAPS, with the balance owned by four
other companies. Production transported by TAPS from Alaska North
Slope fields averaged 748mb/d during 2006.
– The use of US-built and US-flagged ships is required when transporting
Alaskan oil to markets in the US. In September 2006, BP completed
the replacement of its US-flagged fleet with the delivery of its fourth
ship, the Alaska Legend. BP had contracted for the delivery of four
1.3 million-barrel-capacity double-hulled tankers for use in transporting
BP Annual Report and Accounts 2006 25