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Russia investment boosts BP profits

The Independent: Russia investment boosts BP profits

“oil and gas reserves. Unlike Shell, however, BP has been underestimating them”

By Katherine Griffiths

03 July 2004

BP signalled strong profits growth for the second quarter yesterday, with output boosted by its foray into Russia last year.

BP, the world’s second largest oil group, said second quarter production had risen by about 17 per cent from a year ago, thanks mainly to expanded drilling in Russia’s vast reserves.

BP made a major investment in Russia last August when it signed a 50-50 joint venture with the Russian companies Alfa and Access/Renova. It was the second time the oil giant had risked an exposure to the country – a previous joint venture with Sidanco turned sour.

Overall, BP said its output in the three months to the end of June would be about 3.95 million barrels of oil a day.

Without the new Russian joint venture, quarterly output would actually have slipped to 3.06 million barrels a day, compared with 3.25 million in 2003.

The reduction was due primarily to sales of parts of the business, BP said. It announced in April that it had sold stakes in two Chinese oil firms.

On the downside, retail margins came under pressure from rises in crude prices and product costs together with high marketing expenses in Germany and Austria, BP said. Its shares fell 4p to 481p.

The company recently tormented its rival Shell by saying it, too, misled investors about the size of its oil and gas reserves. Unlike Shell, however, BP has been underestimating them. In a recent filing to the US Securities and Exchange Commission, BP said its proved reserves were 23 million barrels higher than stated in its 2003 annual report, and now estimated to be 18.361 billion barrels.

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