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. Last Updated: 07/27/2016

BP's Share in TNK-BP Profit Drops to $183M

Itar-TassWorkers fixing oil-well equipment Monday at TNK-BP's Yermakovskoye field.
Oil major BP's share of net profits at TNK-BP, where it owns a 50 percent stake, plunged in the fourth quarter after the company redeemed back tax claims to the government.

The development, revealed Tuesday, came as a surprise as BP has repeatedly said all back tax claims should be covered only by the Russian shareholders of the venture and should not have recourse to BP's share in the venture's profits.

TNK-BP in October paid the Russian tax authorities $1.4 billion in back taxes for 2002 and 2003.

BP said its share of the fourth quarter 2006 profit of TNK-BP fell to $183 million, compared with $1.5 billion in the third quarter.

BP said the third-quarter figure included a net gain of $892 million from selling the assets of its former unit, Udmurtneft.

"At the present time, BP believes that its provisions are adequate for its share of any liabilities arising from these and other outstanding tax decisions not covered by the indemnities provided by our co-ventures," BP said in a statement.

The oil major also said its share in TNK-BP's profit before paying interests and taxes fell to $359 million in the fourth quarter, from $2.3 billion in the third quarter of 2006.

Analysts say that despite the gain from Udmurtneft's sale, a drop in oil prices and higher export duties contributed to the gap.

"The fourth quarter will be weaker for all Russian oil companies as export duties had risen during the period and oil prices -- both international and domestic -- have dropped," Vadim Mitroshin of Credit Suisse said.

Russia raised oil export duties by around 10 percent to a record $238 per ton in October. The duty, set by the Finance Ministry every two months, was cut to $181 in December.