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Moscow: BP Plc may struggle to revive output growth at its Russian venture as a dispute with the oil company's billionaire partners deepens, according to their representative, Stan Polovets.
BP's partners in TNK-BP will boycott a shareholder meeting today and challenge any decisions taken in court except those regarding dividend payments for minority shareholders, Polovets said yesterday in an interview.
The billionaire shareholders have called for TNK-BP CEO Robert Dudley to resign for favouring BP's interests over their own. TNK-BP Chief Operating Officer Tim Summers rejected criticism of the oil venture last week, saying its performance has been among the world's best since it was formed in 2003.
"If the conflict escalates and continues for some time, it will have a negative impact on the company operations," Polovets said. At the same time, advanced techniques aimed at improving oil recovery are "not proving to be as successful as we had hoped,'' he added.
BP owns 50 per cent of TNK-BP Ltd, with the other half split between companies controlled by billionaires Mikhail Fridman, Viktor Vekselberg, German Khan and Len Blavatnik, together known as AAR. Polovets is AAR's Chief Executive Officer.
TNK-BP produced 1.43 million barrels a day of oil and gas condensate in 2007, less than the 1.44 million barrels a day produced in 2004.
The company sold assets in between, including Udmurtneftegaz, which contributed 115,800 barrels a day of liquids in 2004.
Dudley said in February that output should rise 18 per cent to 1.9 million barrels a day in 2012 as the company develops $15 billion of projects to resume production growth.
"This argument is about performance, performance and performance," Polovets said today, adding that TNK-BP's share price and production growth have lagged behind other Russian oil companies.
"Most of his (Dudley's) decisions have been in favour of one shareholder: BP."
Dudley "has made it very clear that there would be a slowdown and a plateau of production in 2007 and 2008, and it would pick up again in 2009," BP spokesman Toby Odone said. "We've been very public and very open about that."
"Operationally the company has delivered the highest growth of Russian oil companies of 5.8 per cent a year, the highest organic reserve replacement of more than 130 per cent a year and the best finding and development costs in Russia" of less than $2 a barrel, BP said June 16.
In the past 12 months TNK-BP shares have risen 10 per cent, lagging behind the 26 per cent increase in Lukoil and 42 per cent climb in Rosneft over the same period.
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