TNK-BP Restricts Its Gas Production on Gazprom Curbs

By Eduard Gismatullin

Jan. 20 (Bloomberg) -- TNK-BP, the Russian joint venture of Europe’s second-biggest oil company, said natural-gas production is below expectations because of OAO Gazprom-imposed curbs.

Gazprom, Russia’s gas monopoly, today resumed gas pumping to Europe via Ukraine, ending almost two weeks of supply disruptions because of a price dispute. Domestic gas demand has declined because of the economic slowdown, Gazprom Deputy Chief Executive Officer Alexander Medvedev said.

“Gas production is below plan because of the off-take by Gazprom,” Tim Summers, TNK-BP’s chief operating officer, said today in a phone interview.

He declined to specify volumes sold and why Gazprom is taking less gas. “Our oil production is on plan, in fact it’s very slightly ahead of our plan.”

Ukraine’s extended delays in purchasing gas from Gazprom may force the Russian company to reduce extraction because it is committed to buying the fuel from Turkmenistan, Dmitry Loukashov, a Moscow-based analyst at UBS Ltd., wrote in an e-mailed report today.

“We are performing in accordance with contracts signed,” Medvedev said on a conference call with reporters. Independent producers and oil companies should recognize that demand is being affected by slower economic growth, he said.

‘Performing as Normal’

Moscow-based TNK-BP “is performing as normal,” while shareholders, BP Plc and Russian investors, pursue talks on finding a new chief executive officer, said Summers. He has been acting CEO since Dec. 1. after the departure of Robert Dudley.

“The management team and the company are focused very clearly on dealing with the challenges of the external environment at the moment,” Summers said. “The shareholders are in the process of selecting a new chief executive” and “in the meantime we continue to operate.”

The top candidate for the CEO job is Denis Morozov, the former chief executive of OAO GMK Norilsk Nickel. He has a “high” chance of being appointed to the post, Vekselberg said on Nov. 13.

The negotiations come as TNK-BP is installing new management and seeking to put a damaging power struggle between the two groups of shareholders behind it. The oil company is 50 percent owned by BP and the rest by an entity controlled by billionaires Mikhail Fridman, Len Blavatnik, German Khan and Viktor Vekselberg.

On Jan. 15, BP said that Gerhard Schroeder, the former German chancellor, would join the TNK-BP board as a non- executive director. James Leng, chairman of Corus Group Plc, and Alexander Shokhin, president of the Russian Union of Industrialists, will also become non-executive directors.

The management looks “forward to meeting with the new board members at the next board meeting, which is scheduled” for mid-February, Summers said.

To contact the reporters on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net