TNK-BP and SIBUR Holding Establish a JV for Associated Gas Processing
TNK-BP and OAO SIBUR Holding today announced the establishment of a joint venture to process associated petroleum gas (APG) produced by TNK-BP and other oil and gas producers in the Nizhnevartovsk region. SIBUR will own 51% of the new venture and TNK-BP will hold 49% and equally share management control.
SIBUR will transfer to the joint venture control of two gas processing plants: Belozerny and Nizhnevartovsk, and the facilities for transportation of APG to them. TNK-BP will provide long-term APG supply to these plants. The joint venture will also purchase APG from other regional producers. The products from processing the APG will be divided as follows: TNK-BP will receive 100% of dry lean gas (DLG) and SIBUR will receive 100% of liquid products.
All supply and off take contracts will be long-term and based on agreed price formulas. They will include price revision mechanisms allowing for important market changes.
The joint venture will be managed by a Board of Directors with equal representation from TNK-BP and SIBUR. Operational governance will be provided by a Management Board elected by the Board of Directors for a 3-year term with rotation of the General Director position between the parties.
”The joint venture provides an ideal opportunity for TNK-BP to build a foundation for the APG processing business in the Nizhnevartovsk region. This foundation creates several ways to monetize the associated gas and also facilitates a reduction in current gas flaring. Improving the gas utilization rate will also lead to reduction of greenhouse gas emissions which supports fulfillment of Russia’s obligations under the Kyoto Protocol.” – German Khan, Executive Director, TNK-BP, said.
“Natural gas liquids generated in the course of APG processing are the key feedstock for the petrochemical business. Establishment of this joint venture ensures we have guaranteed supplies from a reliable partner and incremental amounts of natural gas liquids in our value chain. The deal has strong business rationale and environmental advantage and is beneficial for all the stakeholders.” – Alexander Dyukov, President, Sibur Holding, said.
Notes for editors
The Nizhnevartovsk region is a key area of TNK-BP’s operations. The Samotlor and Vostok business units produced 6.6 BCM of associated petroleum gas in 2005. TNK-BP is one of the main APG producers in the region. The Nizhnevartovsk and Belozerny plants will receive more than 70% of their feedstock from TNK-BP.
Dry lean gas is supplied to the Nizhnevartovsk state district power plant (GRES) which delivers electricity to the city of Nizhnevartovsk and other consumers through the Parabel-Kuzbass gas transportation system.
Natural gas liquids are transported by a 600-kilometer product line to the SIBUR-owned Tobolsk petrochemical combine and may be shipped by rail to other petrochemical facilities.
The Nizhnevartovsk and Belozerny gas processing plants have a joint nameplate capacity of 12 billion cubic meters per annum. At the moment the plants operate at 8 bcma. In 2005 the associated gas processing volume was about 7 bcm, dry lean gas output amounted to 6 bcm, natural gas liquids production equaled 1.76 million tons, and stable gas naphtha amounted to 235,000 tons.
TNK-BP is one of the largest vertically integrated Russian oil and gas companies. In 2011, average daily oil production totaled 1.99 million barrels per day (including a 50% interest of Slavneft and Venezuela assets). TNK-BP operates five refineries (four in Russia and one in Ukraine) and nearly 1,388 branded retail outlets (including Ukraine and Belarus).