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TNK-BP's annual expenditures associated with the contracting of goods and services in Russia exceed $7 billion

08.08.2011

TNK-BPTNK-BP's annual expenditures associated with the contracting of goods and services in Russia exceed $7 billion while domestic companies account for ninety per cent among its contractors. Efficient management of this critical resource will significantly reduce company’s costs and improve operational profitability.

To achieve this goal the Company is going through a transition from the traditional procurement mechanism to a holistic supply chain management process to establish effective links between the market and the company’s internal needs. An important element of this process is to identify economic effects in supply chains, such as timeliness, quality, price and supplier and contractor efficiency management.

This task was assigned to the Supply Chain Management (SCM) Division responsible for identifying and meeting the company’s requirements for goods and services under most advantageous conditions for TNK-BP both in terms of costs and production indicators. In addition SCM works with suppliers and contractors to create a sustainable competitive market in all key procurement areas.

The SCM Division’s strategy presupposes a transition from short-term agreements to long-term contracting which would enable the company to improve performance and quality jointly with the suppliers.

In meeting its contractual obligations TNK-BP is guided by the highest business management standards governing the procurement of materials and services. The company manages its procurement activities in good faith while ensuring integrity and transparency in accordance with the best professional practices and strictly complies with the applicable legal norms as well as ensures flexibility and external risk reduction for business.

All of the foregoing dovetails with the principles declared in TNK-BP’s Code of Business Conduct.

Detailed information on acquisition of production-related materials and services for Upstream subsidiaries is presented in the section entitled Procurement of Services and Materials, Upstream.

List of deal types indicating approximate average annual costs associated with production-related services procured by Upstream subsidiaries

Costs associated with procurement of services for Upstream

Services – $5.2 billion

TNK-BP
TNK-BP

Costs associated with procurement of materials for Upstream

Materials — $1.2 bln.

TNK-BP

http://www.tnk-bp.ru/en/procurement/



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