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TNK-BP

Type	Public (OAO)
Traded as	MICEX-RTS: TNBP
Industry	Oil and gas
Predecessor(s)	TNK ONAKO SIDANKO
Founded	2003 (2003) (Moscow)
Headquarters	Moscow, Russia
Key people	Mikhail Fridman (Chairman) Maxim Barsky (CEO)
Products	Petroleum Natural gas Refined oil products
Revenue	US$ 60.2 billion (2011)
Net income	US$ 9.0 billion (2011)
Total assets	US$ 37.1 billion (2011)
Owner(s)	BP AAR Consortium
Employees	Approximately 50,000
Website	www.tnk-bp.com/en/

TNK-BP (MICEX-RTS: TNBP) is a major vertically integrated Russian oil company headquartered in Moscow. It is Russia's third-largest oil producer and among the ten largest private oil companies in the world.^[1][2] TNK-BP is Russia's third largest oil company in terms of reserves and crude oil production. It is 50% owned by BP and 50% by a group of Russian businessmen, represented by the AAR (Alfa-Access-Renova) consortium.

Since the merger in 2003 between BP's and AAR's assets in Russia and Ukraine, TNK-BP has expanded through acquisitions such as that of Slavneft and organically through improving operational efficiency. In that time, over a backdrop of shareholder dispute, TNK-BP's profits have risen from US$2.7 billion in 2003 to $5.3 billion in 2009.

DeGolyer and MacNaughton confirmed that as of 31 December 2009 TNK-BP's total proved reserves amounted to 11.667 billion barrels (1.8549×10^⁹ m³) of oil equivalent, applying PRMS (formerly SPE) criteria. Proved reserves constitute a total proved PRMS reserve replacement ratio of 329%.^[3]

History[link]

On 1 September 2003, BP and AAR announced the creation of a strategic partnership to jointly hold their oil assets in Russia and Ukraine. As a result, TNK-ВР was created. ААR contributed its holdings in TNK International, ONAKO, SIDANCO, RUSIA Petroleum (which held licenses for the Kovykta field and the Verkhnechonsk field), and the Rospan field in West Siberia (the New Urengoy and East Urengoy deposits). BP contributed its holding in SIDANCO, RUSIA Petroleum, and its BP Moscow retail network.

In January 2004, BP and AAR reached an agreement to incorporate AAR's 50% stake in Slavneft into TNK-BP. Slavneft, which has operations in Russia and Belarus, was previously owned jointly by AAR and Sibneft (now Gazprom Neft).^{[citation needed]}

In 2009, TNK-BP increased production to 1.69 million barrels per day (269×10^³ m³/d) of oil equivalent (excluding TNK-BP’s share in Slavneft production) compared to 1.642 million barrels per day (261.1×10^³ m³/d) of oil equivalent produced in 2008. In 2009, TNK-BP's total proved reserves replacement ratio reached 329% according to PRMS methodology (formerly known as SPE). The average SEC LOF reserve replacement ratio over the past five years amounted to 139%.

On 18 October 2010, TNK-BP and BP reached an agreement for TNK-BP to acquire BP's upstream and pipeline assets in Vietnam and Venezuela for an overall price of $US1.8 billion.

In October 2011, the TNK-BP agreed to acquire a 45 percent stake in Amazon oil exploration blocks from Brazil's HRT Particiapoes for $1 billion.^[4]

Corporate structure[link]

BP and AAR each own 50% of TNK-BP International Limited, which in turn owns 95% of TNK-BP holding, with the other 5% floating freely on public markets.^[5]

There are 11 directors on the TNK-BP board, with four each from BP and AAR and three independents. As of February 2011, chairman of the board was Mikhail Fridman representing AAR and vice-chairman was George Robertson representing BP.

Maxim Barsky, former head of strategy, having been appointed as deputy CEO in June 2010, is to officially take over as CEO in 2011.^[6]

Operations[link]

TNK-BP is a vertically integrated oil company with a diversified upstream and downstream portfolio in Russia and Ukraine. Its upstream operations are located primarily in Siberia and Volga-Urals region. In 2009 the company (excluding its 50% share in Slavneft) produced on average 1.69 million barrels per day (269×10^³ m³/d) of oil equivalent.

In downstream, TNK-BP controls 675 thousand barrels per day (107.3×10^³ m³/d) in installed refining capacity, with principal refining assets located in Ryazan, Saratov, Nizhnevartovsk, and Lisichansk. The company operates a retail network of approximately 1,400 filling stations in Russia and Ukraine working under the BP and TNK brands. The company is one of the key suppliers to the Moscow retail market and is a market leader in Ukraine.

One of TNK-BP's strategic goals is to expand its natural gas business. Its main gas asset in Rospan International, owned 100% by TNK-BP. Rospan is located in the Yamal-Nenets autonomous area with significant gas potential of 1.4 million barrels per day (220×10^³ m³/d) of oil equivalent of natural gas 3P reserves and an ability to produce 15 billion cubic meters per year.

One of TNK-BP's stated long term aims is to enter into the international market. On 18 October 2010, TNK-BP and BP reached an agreement for TNK-BP to acquire BP's upstream and pipeline assets in Vietnam and Venezuela for an overall price of $US1.8 billion. According to the terms of the agreements, in Venezuela TNK-BP will acquire from BP a 16.7% equity stake in the PetroMonagas SA extra heavy oil producer, a 40% stake in Petroperija SA which operates the DZO field, and a 26.7 % stake in Boqueron SA. In Vietnam, TNK-BP will acquire from BP a 35% stake in an upstream offshore gas production block containing the Lan Tay and Lan Do gas condensate fields, a 32.7% stake in the Nam Con Son Pipeline and Terminal, and a 33.3% stake in the Phu My 3 power plant.

Over 2009, despite an average decline in crude oil price of 36% year-on-year, TNK-BP generated profit of $5 billion. Since the company's emergence in 2003, TNK-BP's profits have risen from $2.7 billion to $5.3 billion in 2009.

In 2009, TNK-BP produced 12.5 billion cubic meters of associated petroleum gas with a utilization rate of 84.4%.

Corporate disputes[link]

In 2008, a corporate dispute between the major shareholders arose as BP and AAR seemed to have differing visions for the company's corporate governance structure and future strategy. During the dispute, it was rumoured that some Western BP executives experienced visa problems, and the American CEO Robert Dudley was accused by AAR of having violated Russian laws.^[7]

On 4 September 2008, the parties to the dispute signed a five-page memorandum of understanding, thus signaling the end of the disagreements.^[8] Robert Dudley stepped down from his role as CEO of TNK-BP and AAR achieved to have their President Mikhail Fridman installed as interim CEO. Since then, an independent CEO, Maxim Barsky, has been appointed and will officially take up his position in 2011.

After the dispute was settled, the general consensus was that although AAR had increased its influence, BP would be happy to keep its 50% stake as TNK BP represented 24% of BP's production and 19% of total reserves in 2007. Some investors had feared BP might lose its interest in TNK-BP with only minimal compensation.^[9] Tony Hayward, BP's chief executive at the time, described the five page memorandum as "a very sensible and pragmatic way of looking forward".^[8]

In January 2010, BP and its Russian co-shareholders held their first joint media briefing to pronounce their tensions gone and TNK-BP.'s prospects bright.^[10]

In January 2011, BP and Russia's state oil company, Rosneft, formed a strategic partnership on Arctic development. In March 2011 the Stockholm International Arbitration court blocked the BP-Rosneft deal as breaching TNK–BP earlier contractual arrangements. BP had previously signed a shareholding agreement with AAR, which stipulated that TNK–BP would be the primary corporate vehicle for BP’s oil and gas operations in Russia.^[11] AAR's legal action led to the collapse of the BP-Rosneft deal in August 2011, when BP was replaced with ExxonMobil as Rosneft's strategic foreign partner in the Arctic.

References[link]

External links[link]

• Official website

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