BP PLC will continue to expand and explore new business opportunities in Russia despite the government's threat to cancel its license in the giant Kovykta gas project.
BP remained unperturbed by concerns over growing risk in Russia, which through 50 percent-owned unit TNK-BP, contributes a fifth of its overall oil and gas reserves and a quarter of its annual production.
Russia, like anywhere, has its risks. You only have to look at BP's experience in the US over the last two years to understand that doing business anywhere in the world can be challenging from time to time. Russia is no different," Tony Hayward, BP's chief executive, said in a speech at a conference in Moscow.
BP will be in Russia for the long-haul, he said, describing the Kovykta issue as "one of those bumps in the road, which we all have to navigate occasionally."
TNK-BP has a capital spending programme of US$3.4 billion in 2007. Part of the budget will be invested in the 35 new licenses it secured in 2006, he said.
The group is also working with Rosneft in another Russian joint venture Elvaryneftegas, which plans to drill two wells this year in the West Shmidt block, an unexplored region in the north of Sakhalin, added Hayward.
"BP's aim is to continue to invest in Russia. We continue to make progress and... we are in this for the long haul," he stressed.
BP is developing Kovykta through TNK-BP, which owns 62 percent of Rusia Petroleum, the field's operator.
Russian regulator Rosnedra has threatened to withdraw the Kovykta license due to the developer's failure to fulfil a commitment to ramp up the field's oil output.
Discussions are ongoing between TNK-BP and Gazprom, Russia's state-run gas monopoly, over the possibility of the latter getting a stake in the Kovykta project, a move seen by many analysts as a way of finally putting an end to the license dispute.
Russian press reports claimed BP is offering Gazprom access to the UK oil group's assets overseas, including those located at the Gulf of Mexico, as part of a Kovykta deal. This will allow BP to keep a significant stake in Kovykta, rather than selling out its entire stake, according to reports.
(AFX News, 19/06/2007)