The Russian-British joint energy venture and Sibur Holding said the new JV will process associated petroleum gas (APG) produced by TNK-BP and other oil and gas producers in the Nizhnevartovsk region, in Western Siberia.
"The joint venture provides an ideal opportunity for TNK-BP to build a foundation for the APG processing business in the Nizhnevartovsk region. This foundation creates several ways to monetize the associated gas, and also facilitates a reduction in current gas flaring. Improving the gas utilization rate will also lead to a reduction of greenhouse gas emissions, which supports fulfillment of Russia's obligations under the Kyoto Protocol," TNK-BP Executive Director German Khan said.
Under the agreement, Sibur will own 51% of the new venture and TNK-BP will hold 49%, and they will equally share management control, the companies said in a statement.
Sibur Holding was established in December 2005 after Gazprom announced it would reorganize the Sibur joint stock company into a new entity, Sibur Holding, as the final step in "the reorganization of the petrochemical business."
Sibur will transfer to the joint venture control of two gas-processing plants in Belozerny and Nizhnevartovsk, and the facilities to transport APG to them, the statement said.
TNK-BP will provide long-term APG supplies to the enterprises. The joint venture will also purchase APG from other regional producers. As a result of associated petroleum gas processing, TNK-BP will receive 100% of dry lean gas, and Sibur will receive 100% of the liquid products, the statement said.
"Natural gas liquids generated in the course of APG processing are the key feedstock for the petrochemical business. Establishment of this joint venture ensures we have guaranteed supplies from a reliable partner and incremental amounts of natural gas liquids in our value chain. The deal has a strong business rationale and an environmental advantage, and it is beneficial for all the stakeholders," said Alexander Dyukov, president of Sibur Holding.