OREANDA-NEWS. July 30, 2007. The Russian-British oil company TNK-BP is planning to increase its investment in utilization of associated gas in order to avoid sanctions by the Kremlin.

Russian Minister of Natural Resources Yuri Trutnev warned oil producers that the average level of associated gas utilization in the country must be at least 95 percent by 2011. Otherwise, violators may be subject to fines.

“We have a program approved by the Board of Directors for 500 million dollars, and we can potentially increase it to one billion dollars,” said TNK-BP Executive Vice President, Upstream Sergey Brezitsky.

According to Brezitsky, about $345 million of the $500 million will be allocated to Orenburgneft, and over $200 million will be allocated to projects in Western Siberia.  The company is planning to increase the level of associated gas utilization from the current 66—73 percent. In November 2006 TNK-BP also informed of its plans to invest over $1 billion in environmental protection measures at Samotlor field.

Some analysts believe that increasing the volumes of associated gas utilization will help the Gazprom gas monopoly overcome a gas deficit by obtaining associated gas from oil companies at low prices.

TNK-BP notes that plans to intensify associated gas utilization are not politically motivated.

“The government only recently began demanding utilization, and we have been working on the program since 2004,” said Orenburgneft head Alexander Berman.  According to Berman, after the program ends, the company’s gas sales will double to 2.0 billion cubic meters per year.

The company planned to raise the associated gas utilization level to 95 percent by 2010 by increasing its processing and possible construction of electric power facilities, spending 6.3 billion rubles toward this end.

TNK-BP was formed in September 2003 as the result of the British company BP merging its Russian oil assets with those of a group of Russian investors belonging to Alfa Group and the alliance Access/Renova.

50 percent of TNK-BP belongs to BP. The other 50 percent belong to Russian billionaires Mikhail Friedman, Viktor Vekselberg, German Khan, and American businessman Len Blavatnik.

TNK-BP’s production amounted to 1.4 billion barrels per day in June, which is 7.7 percent lower than the level of June 2006.

Under pressure by bureaucrats, TNK-BP shareholders agreed to sell control over the gigantic Kovykta gas condensate field to Gazprom at a low price, and agreed to create a joint venture with the gas monopolist.