MOSCOW, Feb 29 (Reuters) - TNK-BP, Russia's third largest crude producer, is looking to increase capital expenditures this year by around 17 percent to offset a production decline in its traditional regions with output growth at new fields.
Chief financial officer Jonathan Muir said on Wednesday the bulk of spending this year will go to greenfields that will begin producing, or increase output, from 2015 or later, including the Rospan gas field and new oilfields in the Arctic region of Yamal.
Capital expenditures will rise to $5.5 billion this year, largely to finance construction at greenfields, and are expected to rise further to about $6 billion annually in 2013-2014, Muir said.
"(Capex will grow) as we start kicking off the Yamal and Rospan projects. We were always expecting this year a slight increase in capital. I expect we might reach $6 billion in the future … as we start to ramp up these projects. And then it will start to come down again," he told reporters during a presentation of the company’s financial results.
TNK-BP, in which BP owns 50 percent, is banking on growth at new fields, especially on the Yamal peninsula, because of increasing depletion of the existing brownfield assets.
For now, greenfields account for one in seven barrels of output. The next site to come online is gas from the Rospan field, due to significantly ramp up production in 2015, then oil from another Yamal field, Suzun, due to be commissioned in 2016.
Gas production at Rospan seen at 3.4 bcm this year and it is expected to jump to 16 bcm per year starting from 2017.
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Earlier on Wednesday, TNK-BP International, the parent company of Moscow-traded TNK-BP Holding, said it saw net income rise 54 percent to $8.98 billion last year on the back of strong production growth and high oil prices.
The revenues of the company were up to $60.2 billion from $44.6 billion in 2010, with EBITDA rising almost 41 percent to $14.6 billion in 2011.
TNK-BP said the increase in revenue was driven by selling oil to domestic refineries and those in former Soviet republics, where margins were higher than on export markets.
TNK-BP, which produced about 1.9 million barrels per day of oil equivalent in 2011 in Russia and a growing portfolio of assets which now includes Venezuela, Vietnam and Brazil, is targeting 2 million barrels per day this year.
Muir also said that TNK-BP will not change its dividend policy. It has routinely paid out multi-billion dollar dividends to its shareholders in recent years.
In 2011 it paid out $7.9 billion, which mostly went to BP and the quartet of Soviet-born billionaires who co-own the company.
It may borrow up to $2 billion this year if borrowing conditions remain favourable, Muir has said.
TNK-BP said in the presentation it raised $500 million in loans from a number of international banks in the fourth quarter of 2011. Its net debt was up to $6.735 billion last year from $4.677 billion seen in 2010.
