Rosneft profits rise, output soars after TNK-BP deal

Russia's top oil company Rosneft announced an 18 percent surge in first-half profits to 137 billion rubles ($4.2 billion) on Monday, as crude production surged following the acquisition and consolidation of BP's former joint venture TNK-BP. The state-controlled oil major said total hydrocarbon production rose 82.8 percent in the first half from the same period 2012. Net profit for the second quarter 2013 dropped to 35 billion rubles ($1.1 billion) from 102 billion rubles ($3.1 billion) in the first quarter as spending grew to uphold Rosneft's huge borrowing commitments. The second quarter of 2013 is the first full quarter where Rosneft has accounted for the new Siberian oilfield, refinery and downstream assets obtained in the $61 billion purchase of TNK-BP from the British oil giant and its Russian oligarch co-owners. Rosneft, which became Russia's biggest oil company after hoovering up the assets of the now defunct oil major Yukos of jailed oligarch Mikhail Khodorkovsky in disputed auctions, acquired TNK-BP with the aim of becoming a global energy giant. Crude oil production rose 73.5 percent in the first half while production from its gas fields rose 186.2 percent, the company said. Refinery throughput was up 33.4 percent. "Growth of hydrocarbon production is due to the acquisition of new assets, as well as organic growth at Vankorneft and Samaraneftegaz fields," Rosneft said in a statement. Rosneft chief executive Igor Sechin, a close ally of President Vladimir Putin who masterminded the purchase of TNK-BP, hailed the results as showing the successful consolidation of the new assets. "The results of the second quarter demonstrate the effectiveness of the integration of the newly acquired assets into the operating and financial activities of Rosneft," Sechin said in a statement. "Rosneft is well positioned to compete in the oil and gas industry with the leading companies in Russia as well as with the largest global players," Sechin added. The TNK-BP deal made Rosneft the world's biggest oil company by production, overtaking ExxonMobil. TNK-BP was fully integrated into Rosneft earlier this year but the first quarter results had taken account of only a few days of its operations. "Despite the complexities of the process we have managed to create a company with uniform business processes and a single centre for the planning of all production activities within just several months," said Sechin.Emphasising Rosneft's intensified international orientation, Sechin said that Frenchman Eric Liron had been appointed his number two as first vice president in charge of production. Liron replaces Eduard Khudainatov, the former chief executive who was demoted to the number two job after Putin appointed Sechin Rosneft chief after his May 2012 presidential election victory. Khudainatov now "moves on to develop new projects where his professionalism, experience and skills will undoubtedly be in demand," Sechin said. Under Sechin, Rosneft has also become one of the world's most ambitious oil companies and has been looking to forge cooperation deals with Western majors to unlock the riches of Russia's Arctic shelf. Seeking to find new markets in Asia, Rosneft and Chinese state firm CNPC signed in June a $270 billion deal to supply China with oil over 25 years. The deal to buy the private TNK-BP stunned some observers and troubled some liberals in the Russian government, coming at a time when Russia is seeking to privatise rather than nationalise assets. Putin last year admitted he had "mixed feelings" about the buyout, describing the decision to back the deal as a "difficult choice".