Russian-British oil major TNK-BP is looking to step up exploration operation inside and outside of Russia and could invest as much as $800 million for that purpose over the next five years.

 The company’s vice president for international projects and geological exploration Chris Einchcomb told journalists on November 21 that the company will beging looking to give its international operations an ever greater role in its portfolio. Two countries of particular focus are Vietnam and Brazil, with TNK-BP’s looking to bid in tenders to develop fields in both countries in addition to consolidating existing cooperation projects.

Investment

TNK-BP will invest $700 million-$800 million for exploration operations inside and outside of Russia over a five-year period, Einchcomb said.

Einchcomb added that TNK-BP currently invests around $400 million into exploration in Russia.

He said that TNK-BP has, over recent years, “demonstrated much competency in developing new fields and plans to develop these operations inside and outside of Russia.”

“Our international operations still aren’t very large, but it already plays an important role in our portfolio. We plan to make a responsible international operator out of TNK-BP. TNK-BP’s growth strategy foresees the company’s transformation into a leading private oil company, both inside and outside of Russia,” he said.

The board of directors at TNK-BP will meet on December 9 and confirm the company’s 2012 business plan. No major changes to the plan are expected, unlike in 2011.

A meeting between TNK-BP’s management and representatives of the board of directors took place in late November. The management presented a draft business plan for 2012, as well as the plan for the next three years, a source close to TNK-BP’s management indicated.

The source said that the 2012 business plan does not feature any radical changes in comparison with 2011. Production should continue to increase at 1%-2%, while organic capex is expected to go up by 10%-15%. The source added that TNK-BP’s development plan factors in capex growth of no more than 15% a year.

TNK-BP’s 2010 business plan foresaw $4.4 billion in investment, but only around $4 billion was accessed. The company planned to increase capex by 15% this year. In addition, production for this year was expected to reach 645 million-647 million barrels of oil equivalent.

Vietnam

TNK-BP and PetroVietnam will decide on the creation of a joint venture next year, Einchcomb told reporters.

There have been two meetings with PetroVietnam management in the last few weeks, Einchcomb said. No specific projects are on the table yet, but the companies are looking at how to make use in Russia of production skills gained in Vietnam and the other way around, he said. More fruitful discussions of a possible joint venture will be had next year, he said.

TNK-BP is also eyeing the liquefied natural gas business, Einchcomb said. The company does not have the experience yet, but has discussed the subject with Vietnam. This is an area TNK-BP needs to move into, not only in Vietnam, but also in Russia, he said.

TNK-Vietnam, a wholly owned subsidiary of TNK-BP, will by the end of 2012 put the Lan Do deposit into production, the company’s general director, Hugh McIntosh, said at the presentation of the company’s development strategy for Vietnam.

TNK-Vietnam plans to drill two wells next month as it develops the Lan Do deposit, and expects initial flow from them in Q4 2012. The company expects that in time that will provide 2 billion cubic meters (bcm) of gas per year and keep production at block 06.1 at the current level of 5 bcm.

Lan Do investment plans weigh in at $400 million. Gas has already been produced at the block (Lan Tay) for several years now.

The license for block 06.1, which belongs to TNK-Vietnam, is valid until 2023 with the possibility of a five-year extension.

At the end of last year, TNK-BP agreed with BP on the purchase of assets from shareholder BP in Vietnam and Venezuela for $1.8 billion. The companies sealed the exchange of Venezuelan assets this past June and in October, TNK-BP wrapped up the process of joining the Nam Con Son project in the country.

The Nam Con Son project includes the shelf block 06.1 (containing the gas condensate deposits Lan Tay and Lan Do, in which TNK-BP has a 35% stake) and one of the world’s longest dual pipelines. It is called Nam Con Son (TNK-BP has 32.7%) and is operated by Phu My 3 (TNK-BP is in the process of obtaining a 33.3% stake).

TNK-Vietnam will also take part in license tenders for the development of offshore blocks put up by PetroVietnam, McIntosh said.

“Vietnam is an attractive place for business, and TNK-BP will be here for a while. Having focused on integrating new assets in TNK-BP’s portfolio, we are looking for new opportunities for expanding our presence in Vietnam,” TNK-BP’s vice-president for international projects and geological survey, Einchcomb said.

Einchcomb also said that TNK-BP’s plans for Vietnam especially focus on offshore developments of gas fields. The company plans to use its operational experience with offshore protections for future expansion of operations in Southeast Asia.

TNK-BP finished its acquisition of assets in Vietnam in October. The company bought them from one of its main shareholders, Britain’s BP. The company is now looking for new opportunities for growth in energy in the country.

The tender for geological exploration in Vietnam’s offshore areas was announced in September. Applications should have been received at the start of December.

It was earlier reported that Bashneft, which currently does not have any foreign projects, has already acquired an information packet for the next tender for Vietnamese offshore blocks. In addition to Bashneft, two more Russian oil companies have shown interest in expanding operations in Vietnam, namely Lukoil and Zarubezhneft.

Russian state company Zarubezhneft has had operations in Vietnam since Soviet times in the framework of a joint venture with Vietnamese company PetroVietnam, Vietsovpetro. This JV is responsible for around 25% of oil production in Vietnam. However, the JV’s production has been in decline. Zarubezhneft has repeatedly said that it plans to take part in new tenders in Vietnam.

Lukoil and TNK-BP only entered Vietnam this year.

Russian gas giant Gazprom is also working with PetroVietnam in the country. The partners have already discovered the Bao Vang and Bao Den fields. Exploration wells are now being drilled.

Oil production in Vietnam has been declining in recent years. The country has repeatedly brought up the issue of boosting total development of new fields, primarily, in offshore zones. As a result, Vietnam regularly holds tenders for presenting geological survey and development rights for new sections. The country is now looking for foreign partners for both offshore and on-land operations.

Brazil

Another area of interest is Brazil, and TNK-BP intends to participate in tenders for oil and gas fields in that country, Einchcomb told journalists.

Licenses for oil and gas fields will be offered in Brazil in the near future. TNK-BP is interested in participating in them and expanding its business in that country, Einchcomb said.

TNK-BP is currently in the final stages of joining the Solimoes project in Brazil, he said.

Commenting on plans for developing the company’s activities in Venezuela, Einchcomb said that there are no plans for field tenders in that country. Mainly, intergovernmental cooperation on energy is now under way. TNK-BP’s main emphasis in Venezuela is developing complex reserves, Einchcomb said.

In Venezuela, TNK-BP acquired a 16.7% stake in PetroMonagas, which produces highly-viscous oil; a 40% stake in Petroperija, which operates the DZO field; and 26.7% in Boqueron. Operations at these assets are implemented in the framework of joint ventures with PDVSA.

TNK-BP also plans to close a deal for working in an oil and gas project in Brazilian region of Solimoes in the next three months, Einchcomb told journalists.

“We hope that the necessary documents are approved in the next three months or by the end of the first quarter [of 2012],” he said.

TNK-Brazil at the end of October signed a farm-in agreement and a joint operating agreement with Brazilian company HRT O&G for 45% in the Solimoes Basin oil and gas project in the South American country.

Earlier, TNK-BP and Petra Energia signed an agreement on acquiring a 45% stake in the Solimoes project. Sources said that TNK-BP could pay Petra Energia $1 billion in five tranches of $200 million each over two years.

The deal will be considered closed once the authorities approve the agreement. The 21 oil- and gas-containing exploration blocks spread over roughly 48 000 square kilometers in the Amazon Solimoes Basin. Of the 21 blocks, 11 have already produced oil and gas.

According to a Degolyer & MacNaughton reserves audit report, the blocks have a net prospective and contingent resource of 789 million barrels of oil equivalent (BOEs). These include 11 discoveries where oil and gas were tested. Initial production from the fields in the Solimoes Basin is expected in 2012. Capital investment in the project is estimated at $9.2 billion, and including the construction of an oil pipeline – around $14 billion.

Brazil is currently one of the most attractive regions in terms of hydrocarbon production – it has attracted the attention of the world’s largest oil and gas companies. Russian oil company Lukoil has officially expressed interest in the country.