The Guardian: Russian boom lifts BP profits: “Shell recently warned the City that its production growth would be flat until at least 2008, BP said it was on track for a 10% overall increase this year. And it rubbed salt in the wounds of its rival by predicting that output would increase at 5% per annum, excluding any contribution from Russia.” (ShellNews.net)

Terry Macalister

Tuesday October 5, 2004

Booming Russian oil production helped BP to report yesterday an 11% increase in its third-quarter output and put it on track for full-year profits of about £9bn.

The success of the business brought an immediate backlash, with Friends of the Earth accusing the company of benefiting at the expense of the taxpayer and the environment.

A 36% increase in volumes from TNK-BP in Russia helped bring the British company's total output to 3.8m barrels of oil equivalents a day at a time when the price was 46% higher than the same period of 2003. But the successful Russian performance masked problems elsewhere as hurricanes and a fire caused a cut in output in the 12 weeks to September 30.

However, while Shell recently warned the City that its production growth would be flat until at least 2008, BP said it was on track for a 10% overall increase this year.

And it rubbed salt in the wounds of its rival by predicting that output would increase at 5% per annum, excluding any contribution from Russia.

It said in a trading statement this would result from "a continuing ramp-up in production in the new profit centres".

Refining margins also rose on the year but were down from record second-quarter levels while petrochemical margins and sales volumes were in line with the previous three-monthly figure.

Bruce Evers, oil analyst with Investec Securities, welcomed the strong performance, saying it was "in line with expectations", while the stockbroker Charles Stanley reiterated its "buy" notice.

But Hannah Ellis, a campaigner with FoE, said shareholders and the British government should be "ashamed" that BP was obtaining public cash for projects such as the Baku-Ceyhan pipeline.

"BP's predicted multibillion pound profits are thanks to subsidies from the UK taxpayer and exploitation of communities and the environment around the world," she said.

BP is expected to show $16bn (£9bn) net income for the year, compared with $12.8bn for the 12 months earlier.

The BP performance in Russia helped that country to a new post-Soviet high of 9.42m barrels a day of oil in September even though output was flat at troubled Yukos.

Shares in Yukos, Russia's largest oil group, rose 13% yesterday after reports that the German investment bank Dresdner Kleinwort had valued Yukos's main production unit at $15.7bn to $17.3bn.

Dresdner has been brought in because Yukos may sell Yuganskneftegaz to pay a huge $7bn tax bill, believed to have been imposed by the Kremlin.

Shell said yesterday that it too might be ready to increase investment in Russia with a third "train" (processing plant) for LNG being considered at the Sakhalin gas project.

Meanwhile, global crude prices eased after rebels in Nigeria withdrew a threat to target oil operations, but lingering concerns over stretched supplies ahead of winter kept prices close to $50 per barrel.

US light crude was down 57 cents from Friday's record settlement price of $50.12 and Brent North Sea crude fell 63 cents to $45.99 a barrel.

The easing of prices came as oil companies considered returning evacuated workers to Nigeria's oil-producing Delta region after a rebel militia signed a peace deal on Friday.