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Tuesday, June 12, 2007

TNK-BP plans Uvat cash splash

04 June 2007 - Upstream OnLine - BP's Russian venture will double investment in its giant West Siberian Uvat oil project next year, the company said today as it faced the risk of losing its licence for the Kovykta gas field. TNK-BP will invest $1.5 billion in the Uvat project next year, up from $760 million this year, as it wants to increase production to 10 million tonnes per year by 2020 from the current 1.5 million tonnes. "We want to turn it into a new Russian oil province," said the head of TNK-BP's Tyumen unit, Viktor Blagoveshchensky, as the company took journalists to Tyumen to present its updated strategy for Uvat. The Uvat project is in the south of the Tyumen region on the border with Kazakhstan. It combines 16 deposits, most of which were discovered in the Soviet period and may contain as much as 250 million tonnes or 1.83 billion barrels of oil. By comparison, TNK-BP's total reserves are 7.81 billion barrels. "The project has been on ice for a long time because we had no technologies to make it economically viable," Blagoveshchensky said. "We had to build the project from scratch as the oil is very difficult to recover." He said that, besides new technologies, the increase in global oil prices had also helped the company embark on the project, which can break even only at more than $40 per barrel. TNK-BP is launching its Uvat strategy as Russia toughens its stance towards private oil producers and is threatening to strip licences for non-compliance, while state-controlled companies are playing a larger and larger part in the oil and gas industry. TNK-BP came under pressure last year for failing to produce the agreed volumes of gas at the East Siberian Kovykta field, and it could lose its licence there for failing to meet production targets set out in the contract terms. Uvat is unlikely to face the same problems. Tyumen region's resources head Sergei Prozorov said that the licensing agreements contained no production obligations as exploration was still continuing, Reuters reported.

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