TNK-BP May Boost Orenburg Production, No Plans for Volume Reduction

TNK-BP continues development of new fields in spite of the crisis, which has made many oil companies scale down or roll back their investment plans, said German Khan, Executive Director of TNK-BP, after signing an agreement of cooperation between the Administration of the Orenburg Region and the company in 2009.

"In Orenburg, we are going to maintain our production at the level of 2008 or even increase a little," he added. TNK-BP is not going to reduce the production volume in near future.

Orenburgneft, the principal subsidiary of TNK-BP in the Orenburg Region, increased its oil production in 2008 up to 15.6 million tons, which is 1.9% higher than in 2007 and 1.1% more than implied in the business plan of the company. The gas production of Orenburgneft in 2008 amounted to approximately 1.8 billion cubic meters, which is line with the volume planned for 2008 and 9.4% more than in 2007.

"Last year, we implemented geological engineering measures in 966 wells of the oil and gas production departments of Orenburgneft for incrementing the reserves of hydrocarbons," said a representative of the press service of Orenburgneft.

In the Orenburg Region TNK-BP produces hydrocarbons in four main oil-bearing areas -- Buzuluk, Buguruslan, Sorochinsk, and Pervomaisk. Most fields here are small and scattered over a vast territory, which requires certain gentleness in their development.

"The period of aggressive development of a small field with reserves of approximately 0.3-0.4 million tons is quite short," reckoned Alexander Berman, General Director, Orenburg Business Unit, TNK-BP. "That is why development of such fields require a gentle attitude, because a pressure buildup may ruin the field forever." A large number of field in the Orenburg Region implies diverse characteristics of oil produced in them. "We have all types of oil from Urals to Brent," continued Mr. Berman. "Oil from fields like, for example, Pevomaiskoe field, reminds a rainbow with colors changing from green to orange. This diversity means that the company has to use a more diversified system of oil transportation and sales."

In view of the fact that hydrocarbons here are produced in numerous small fields the number of which is more than one hundred, the company has to integrate new hydrocarbon production technologies. Apart from that, the Orenburg Business Unit of TNK-BP is going to start development of small field in areas bordering the Orenburg Region. In particular, exploration drilling will be started this year in the Samara Region and Saratov Region, were seismic surveys were conducted last year. Seismic studies will be continued in the Astrakhan Region. The Orenburg Region provides many possibilities for growth, and the company is going to expand its presence in the eastern part of the region.

In the conditions of the current financial crisis and plummeting oil prices, development of complex fields is not an easy task. Nevertheless, the company will not shrink its production in the traditional oil production regions, one of which is the Orenburg Region. German Khan noted that the oil production of the company may only slightly drop due to retardation of new projects in Eastern Siberia, on the Yamal Peninsula, and in the Krasnoyarsk Region. Despite this slight drop, TNK-BP will remain the largest taxpayer in the Orenburg Region. Moreover, the company exceeded its tax liabilities last year. In 2008, the overall taxes paid by the company subsidiaries working in the Orenburg Region into budgets of all levels exceeded 69 billion rubles, which is 29% more than in 2007.

According to Alexei Chernyshev, Governor of the Orenburg Region, in 2008 TNK-BP paid the largest sum into the budget in the history of the region. However, the Governor noted that 2009 will be a hard year for the region as the oil prices now are nearly one third of what they used to be just five months ago. In spite of this threefold price drop, said Mr. Chernyshev, the tax payments of TNK-BP into the budget will only decrease twice if the oil price is maintained at the level of $41 per barrel.