Bloomberg News

TNK-BP Plans to Borrow $1 Billion for Project Funding

February 13, 2009

TNK-BP (TNBP), the Russian joint venture of BP Plc (BP/), plans to raise about $1 billion in medium-term debt in a “difficult” market to fund projects and refinance existing borrowing this year, Chief Operating Officer Tim Summers said.

The company plans to repay about $1.8 billion this year, he said today in a phone interview. TNK-BP has about $6 billion debt, some of which “is long-dated,” Summers said, who has been TNK-BP acting Chief Executive Officer since Dec. 1.

“The bond markets look quite difficult to access at the moment” as the current macroeconomic environment provides “opportunities” to acquire assets, Summers said.

TNK-BP reopened a search for a new CEO after shareholders halted talks with Denis Morozov, the former chief executive of OAO GMK Norilsk Nickel. Former CEO Robert Dudley left after a battle between BP and the venture’s four billionaire shareholders over strategy and management.

BP, which holds about 50 percent of TNK-BP, is drafting a short-list of candidates for new CEO. Summers’s contract for the CEO role has been extended until mid-year, he said.

The shareholders “are focused on the search,” Summers said. Meanwhile, “we are on plan” with our projects and the company “is operating normally.”

Uvat Oil

Moscow-based TNK-BP plans to start pumping crude at its Uvat project in Siberia next week. Oil will be supplied into the new 264-kilometer (165-mile) pipeline for injection into the national network, he said. Production will be between 20,000 and 30,000 barrels a day this year. The company plans to invest about $2.5 billion in the Uvat project at the initial phase of development, Summers said.

Depending “on the ultimate potential of the reservoir” it will be possible to produce as much as 9 million tons a year (180,000 barrels a day) “coming from that region” with several deposits, he said. “It will take time” to reach that output rate.

TNK-BP has restored natural gas extraction to the “seasonal normal levels” this month, after OAO Gazprom, Russia’s gas monopoly, ended restrictions on supplies into the nation’s pipeline network, imposed in January, Summers said.

Gazprom cited lower demand for gas from Russian consumers as one of the reasons for gas pumping limitations.

TNK-BP increased oil and gas production by 2.6 percent to 601 million barrels of oil equivalent last year, Summers said.

BP is Europe’s second-biggest oil company after Royal Dutch Shell Plc.

To contact the reporters on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Guy Collins at guycollins@bloomberg.net


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