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TNK-BP board to review venture’s spending plans

TNK-BP board to review venture’s spending plans 

By Russell Hotten

Last Updated: 12:34am BST 31/07/2008



The board of BP’s Russian oil joint venture, TNK-BP, will review the operation’s capital spending plans, one of the key points of dispute in the bitter power struggle between the UK company and its billionaire partners. 

Mr Dudley, the TNK-BP chief executive who left Russia last week citing “sustained harassment”, is trying to run TNK-BP, Russia’s third largest oil producer, from a secret location. 

TNK-BP’s Russian investors in the 50-50 joint venture claim Mr Dudley sanctioned an increase in capital spending from $3.5bn to $4.4bn without board approval, which he denies. The Russian camp, operating under a consortium called AAR, were angry because this would reduce dividend payments. 

Mr Dudley said the TNK-BP board had agreed to review the budget, which it had approved in November 2007, following a request by some directors that capital spending should be reduced by some $900m. Accordingly, he said, management had produced an analysis of the options available for cutting it back.

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  • He said: “I continue to believe that the level of capital investment proposed to and approved by the board last November is the appropriate level for the company… Until the board advises me that it wishes to reduce this, management will continue with the implementation of this programme, which is on track.”

    It was unclear last night whether Mr Dudley’s comments were a small concession that might get both sides around the negotiating table, or a further entrenchment of positions.

    In response, Stan Polovets, chief executive of AAR, said: “AAR’s position on capital expenditure is very clear. We believe TNK-BP is focusing too much on reserve replacement, which offers low shareholder returns, so we want to reduce this focus. However… we would be ready at any time to discuss this with our partners, BP.”

    AAR insists any resolution of the row must involve Mr Dudley’s dismissal, something which BP refuses to approve.

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