OREANDA-NEWS. March 01, 2010. TNK-BP is trying to bring to 95% its level of associated petroleum gas (APG) utilization. Although the company still has almost two years to do so, the standard that is established by the government program is already complied with in some fields. Bill Schrader, TNK-BP COO, said yesterday that APG utilization projects would get USD450M of investment this year and the total volume of investment would approximate USD 1.8B, reported the press-centre of TNK-BP.

The company intends to continue implementing its program but advocates a dialog with the Government with regard to its new projects.

TNK-BP is among the industry leaders in APG utilization. The company utilized 79% of its produced APG (9.7 Bcm) and flared ca. 2.6 Bcm in 2008. According to Evgeny Bulgakov, TNK-BP Vice President, who talked to Vremya Novostei, the company managed to increase the level of utilization to 84% last year. By 2012, it intends to rise to the 95% utilization target set by the Government. The company is implementing several associated gas processing projects simultaneously in Nizhnevartovsk, which is TNK-BP’s largest production region. The level of APG utilization in the key Van-Yoganskoe Field will reach 95% as early as this year thanks to commissioning of the first stage of a gas turbine power plant. TNK-BP established a joint venture with SIBUR, Yugragazpererabotka, in 2007. The plant capacity is ca. 7.7 Bcm and may be increased by 0.8 Bcm per year. Since 2008, the company has a 25% interest in Nizhnevartovsk GRES, which takes an almost extra 3 Bcm a year to that volume.

According to Schrader, the holding spent USD 700M for all of its APG utilization projects. Starting from this year, the ‘investment in the future’ will amount to USD 1.1B. Therefore, the total cost of the TNK-BP program will reach ca. USD 1.8B.

However, this is far from the final figure since TNK-BP has no complete understanding of how much it could cost to implement the program in the new fields where the company has just started working. “Our new projects are a special topic”, Schrader says. — “We need years to understand how much associated gas we have and how to utilize it in the fields we are going to develop. We need to have a very clear understanding of the project and know the subsurface reservoir structure completely. Otherwise, we cannot make any decisions. Such is the situation in Yamal, for instance”. So, the Chief Operating Officer believes they need a dialog with the Government on specific projects. “One cannot invest in something they do not understand. We are holding relevant discussions with the Government, and it understands the reality of doing business in this country as clearly as we do”, Schrader said.

It cannot be ruled out that companies, including TNK-BP, may seriously amend their plans for projects in East Siberia, which is becoming Russia’s most important oil region. According to Schrader, the scope of investment in Verkhnechonskoe Field where ca. 3 Mt of oil will be produced this year was determined on the basis of export duty nullification that was announced long ago. However, this idea is known to be vigorously criticized by the Ministry of Finance, so there is a probability that the zero duty decision will be cancelled. “We invest in East Siberia just considering that the tax and duty will be nullified. If, after all, they decide to reject export duty nullification, our project funding plans will be revised accordingly. Unfortunately, the Government is still unclear about it”, Schrader said.