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Sunday, 20 July, 2008, 02:10 GMT | more prices >>

TNK-BP shrugs off China pipe delay



By Upstream staff 

BP's Russian venture, TNK-BP, sees no threat from a possible delay to the launch of Russia's first oil pipeline to China for its prized field as it may send the crude westward instead.

Tim Summers, TNK-BP's chief operating officer, told Reuters today the Verkhnechonsk field in East Siberia will start production at the end of this year, as planned, regardless of whether the new pipeline is ready to ship the output to China.

"I do not expect the pipeline's availability to have an impact on production volumes... There is a possibility that we will be ready to go to the West earlier than the overall Transneft system is completed," Summers told a briefing.

He said TNK-BP will make a final decision on where to send crude from the field later this year, when Russian pipeline monopoly Transenft , which is building the 600,000 barrel per day pipeline, clarifies its plans.

Transneft said in December that it might delay the launch of the pipeline, initially planned for the end of this year, by at least nine months because contractors failed to meet the schedule.

The route, Russia's first pipeline link to China, is expected to help the country diversify its exports away from European markets.

Summers said Verkhnechonsk will stick to its plans and expected to produce at least 1 million tonnes of crude next year and increase output to 3 million tonnes per year within the next few years.

TNK-BP hopes the field to reach maximum production of 7 million to 8 million tonnes per year by 2011, he said.

Verkhnechonsk, with recoverable reserves estimated by TNK-BP at 1 billion barrels, is one of the largest oil deposits in East Siberia, which, Russia hopes, will replace depleted West Siberia as its oil production centre.

TNK-BP pins its hopes on Verkhnechonsk as well as its another greenfield project, Uvat in West Siberia, to raise annual output by 1.5% to 2% from next year as output is declining at the firm's mature deposits in West Siberia.

The company produces over 1.4 million barrels per day (70 million tonnes per year), down from 1.6 million bpd in recent years after assets divestments, but flat based on a like-for-like comparison.

Verkhnechonsk, 1000 kilometres to the north of Irkutsk, is operated by VerkhnechonskNefteGaz, in which TNK-BP owns 68%. Russia's largest oil producer Rosneft holds the rest.

Summers said both companies plan to invest $4 billion to $5 billion into the project over around the next eight years, depending on the number of wells they decide to drill.

He said by the end of this year they will drill 50 wells ready for production, up from 25 now. The whole project may require drilling 500 to 600 wells, he said.

"By the end of this year, the investments will reach $1 billion on the field, which means that we are spending around $10 million a week on it," he said.

Thursday, 07 February, 2008, 16:26 GMT  | last updated: Thursday, 07 February, 2008, 16:28 GMT

Delays: on Rosneft's crude export link to China
 

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