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Last Updated: Friday, 2 July, 2004, 10:26 GMT 11:26 UK
Russian oil to boost BP profits
BP staff at work. Pic from BP website
Oil from Russia spells gushing profits in the pipeline
Oil giant BP has boosted oil and gas production by 17% year-on-year in the second quarter, thanks to expanded drilling in Russia's vast reserves.

This is likely to signal bumper second-quarter profits for BP at a time when oil prices have soared given increased tensions in Iraq and the Middle East.

Shares rallied earlier in the week on news that BP had reserves of 23m more barrels of oil than previously stated.

Its joint venture in Russia has helped BP offset slower growth elsewhere.

The world's second largest quoted oil firm reckons its output in the three months to the end June will add up to around 3.95million barrels of oil a day, that's 17% ahead of the same time a year ago.

No worries

Back in April, BP reported record first-quarter net profits of 2.60bn ($4.71bn), helped by the sale of stakes in two Chinese oil firms.

Its Russian joint venture - it has a 50% stake in oil rival TNK - has come at just the right time. Without it, quarterly output would have actually have slipped to 3.06 million barrels a day.

On the downside, retail margins came under pressure from rises in crude prices and product costs together with high marketing expenses in Germany and Austria.

Nevertheless, with the price of oil hitting a two decade peak in June, BP has little to worry about.

"The cash that companies like BP are getting at this level is huge," said Cheuvreux analyst Peter Hitchens.

"BP's statement highlights the fact that we should see very good profits from the sector during this quarter," he added.

Shares in BP have gained around 13% in value since the start of 2004.

They were trading down 2 pence at 483 pence at 1100 BST.

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