Kremlin Soothes Bp Over Trading in Russia

Lord Browne, the BP chief executive, has sought personal assurances from the Kremlin that his investments in Russia through TNK-BP will not be hit by the Yukos affair.

He now believes the problems facing Russia's biggest oil group are largely political - and particular to that company - having received confirmation that BP's presence in that country is "decidedly welcome".

Russian oil output helped BP lift second-quarter pro-forma profits by nearly a quarter to $3.9bn (£2.1bn) and brought first-half earnings to a record $8.6bn, slightly lower than expectations.

Overall production for the quarter was up by 18% to 3.9m barrels of equivalents a day but overall output would have been 7% down without Russia, owing partly to the effects of divestments.

BP benefited from a Brent blend crude oil price of $34 per barrel compared with $25 during the same second quarter of 2003, and looked set for bigger windfalls as US oil broke through the $42 mark last night.

Lord Browne said the British motorist only contributed "one-tenth of 1%" to group profits, saying the forecourt business was squeezed by chronic competition.

Buoyant after raising the quarterly dividend 9% to 7.1¢ per share, Lord Browne said his group was providing £1 in every £6 moving into pension funds via British company dividends and share buybacks.

"The results you see today are strong but they are just the beginning. The real potential of the company is yet to come," he boasted.

Analysts at Investec Securities praised BP for "another excellent set of results" though others were slightly disappointed and the share price remained steady at 488.75p.

Lord Browne insisted he had no interest in chasing "bigness" for the sake of it. He refused to make any comment on US analyst suggestions that now was the opportune time to make a takeover move for Shell, whose share price has been battered by slow growth and the oil reserves scandal.

BP plans to increase its capital expenditure from $9bn to $9.5bn this year while the BP-TNK Russian group will increase output and expects to pay $2bn worth of dividends.

Lord Browne has just returned from a visit to Moscow where he saw the prime minister, finance minister and other senior politicians - although not President Vladimir Putin himself.

He brushed aside allegations that Slavneft, a Russian company majority owned by TNK-BP and oligarch Roman Abramovich, was acting unfairly against its minority shareholders.

He said BP had made clear to the TNK-BP board it must apply the same standards of corporate governance in Russia as it applied elsewhere in the world. "There must be equable treatment for all shareholders," he promised.

Lord Browne has been in contact with the president of Georgia over problems on the Baku-Tbilisi-Ceyhan pipeline and confirmed that work has stopped on the link from the Caspian.

He said there were "security" issues to be dealt with and he had reassurances that work would not be held up.