By GREGORY L. WHITE
MOSCOW—TNK-BP Ltd., hopes to substantially increase its natural-gas business by the end of the decade, investing billions of dollars to become a major player in the sector, Executive Director German Khan said.
TNK-BP, which is half-owned by BP PLC, aims to produce about 35 billion cubic meters of gas a year in 2020, about triple last year's level, with the business generating earnings before interest, taxes, depreciation and amortization of about $4 billion annually, Mr. Kahn said in an interview.
At present, gas is a small part of TNK-BP's portfolio, with marketing opportunities limited by the dominance of monopoly OAO Gazprom. But Mr. Khan said he expects Gazprom's grip to ease over the next several years, allowing other producers better returns in Russia and possibly the chance to sell for export, potentially with a single company acting as agent. At present, Gazprom has a monopoly on exports and rivals are limited to sales on the domestic market, where prices are much lower.
"In the midterm, if we're talking about reform in the gas sector, we'll get to a situation where a single exporter for a minimal commission will be selling gas from various producers," he said. "I think that would be acceptable."
Growth over the next decade in oil won't be as fast, averaging about 1% to 2% a year and in line with the rest of the Russian industry, Mr. Khan said. TNK-BP made its first major overseas steps this year, and he said he hopes that in the near future, about 10% of its oil and gas production will come from outside Russia.
Within Russia, he said he expects the government ultimately will move ahead with tax changes aimed at stimulating development of new, more costly fields. He said the threat of declining output will force such changes. Similarly, he said he expects the government will be forced to ease restrictions that now limit access to offshore fields to state companies, opening the way for private ones or consortia.
"It's a matter of historical expediency. Allowing only three companies access to the shelf will lead our country to fall behind competitors," he said.
He also said that TNK-BP recently agreed with the state pipeline monopoly for a new kind of contract in which oil producers would guarantee shipping volume in return for the monopoly building a new pipeline to fields in the Yamal region in the Arctic. Lack of pipeline capacity has been an obstacle to developing new fields, but Mr. Khan said this approach would likely work in other regions, as well.
Mr. Khan, who also is a major shareholder in TNK-BP, said the current 50-50 ownership structure between BP and the group of Soviet-born billionaires in which Mr. Khan is a partner is workable despite periodic conflicts.
"We believe in this structure," he said. He and his partners have no plans to sell their stake, he said. He declined to comment on current legal conflicts between BP and its partners.
He said the joint venture, which isn't publicly traded, is valued around $65 billion.
