June 25 (Bloomberg) -- BP Plc may struggle to revive output growth at its Russian venture as a dispute with the oil company's billionaire partners deepens, according to their representative, Stan Polovets.

BP's partners in TNK-BP will boycott a shareholder meeting tomorrow and challenge any decisions taken in court except those regarding dividend payments for minority shareholders, Polovets said today in an interview.

The billionaire shareholders have called for TNK-BP CEO Robert Dudley to resign for favoring BP's interests over their own. TNK-BP Chief Operating Officer Tim Summers rejected criticism of the oil venture last week, saying its performance has been among the world's best since it was formed in 2003.

``If the conflict escalates and continues for some time, it will have a negative impact on the company operations,'' Polovets said. At the same time, advanced techniques aimed at improving oil recovery are ``not proving to be as successful as we had hoped,'' he added.

BP owns 50 percent of TNK-BP Ltd., with the other half split between companies controlled by billionaires Mikhail Fridman, Viktor Vekselberg, German Khan and Len Blavatnik, together known as AAR. Polovets is AAR's Chief Executive Officer.

TNK-BP produced 1.43 million barrels a day of oil and gas condensate in 2007, less than the 1.44 million barrels a day produced in 2004. The company sold assets in between, including Udmurtneftegaz, which contributed 115,800 barrels a day of liquids in 2004.

Lagged Behind

Dudley said in February that output should rise 18 percent to 1.9 million barrels a day in 2012 as the company develops $15 billion of projects to resume production growth.

``This argument is about performance, performance and performance,'' Polovets said today, adding that TNK-BP's share price and production growth have lagged behind other Russian oil companies. ``Most of his (Dudley's) decisions have been in favor of one shareholder: BP.''

Dudley ``has made it very clear that there would be a slowdown and a plateau of production in 2007 and 2008, and it would pick up again in 2009,'' BP spokesman Toby Odone said today. ``We've been very public and very open about that.''

`Highest Growth'

``Operationally the company has delivered the highest growth of Russian oil companies of 5.8 percent a year, the highest organic reserve replacement of more than 130 percent a year and the best finding and development costs in Russia'' of less than $2 a barrel, London-based BP said June 16.

In the past 12 months TNK-BP shares have risen 10 percent, lagging behind the 26 percent increase in Lukoil and 42 percent climb in Rosneft over the same period.

Polovets said the dispute could hurt TNK-BP's operations if there is no speedy resolution though there has been little evidence of this so far.

``Currently we don't see any problems in the production unit operations,'' he said.

BP Russian Investments Ltd. head Alistair Graham told reporters June 19 that TNK-BP has been forced to suspend several drilling projects as contracted employees remain barred from work and the billionaire partners seek to overturn their contracts in Moscow.

New Technologies

TNK-BP's use of new technologies to boost output and produce heavy oil may be delayed after 148 engineers, analysts and other workers assigned by BP were barred by the court order in March, he said. TNK-BP's drilling capability has been ``devastated'' as a result, Graham said.

State-run OAO Rosneft, TNK-BP's rival which is now Russia's largest producer, raised average oil output to 1.98 million barrels a day last year up from 433,800 barrels a day in 2004, boosted by buying OAO Yukos Oil Co. assets that were auctioned off by the state to retrieve a tax debt of more than $30 billion.

OAO Lukoil's crude oil output grew to 1.94 million barrels a day in 2007 from 1.73 million barrels a day, up 12 percent when equity affiliates are included, according to the company's annual statements.

Mature deposits such as Samotlor, TNK-BP's largest, may provide recoverable reserves of as much as 2 billion barrels of oil equivalent through the use of new technologies, Dudley said earlier this year. New fields will boost output after 2009, he added.

Environmental Concerns

BP's dispute with its TNK-BP investors is not the only struggle involving international companies doing business in Russia.

To get Shell to sell Gazprom a majority stake in the $22 billion Sakhalin-2 venture last year, Russia threatened to block the project because of environmental concerns. Gazprom, based in Moscow, is also taking control of BP's Kovykta Siberian gas deposit after the government threatened to revoke the contract for failing to meet the schedule.

BP agreed in February 2003 to form its TNK-BP venture with Fridman and Khan's Alfa Group, Vekselberg's Renova Group and Blavatnik's Access Industries.

BP and the TNK billionaires only two years previously had settled a battle for control of assets, after TNK returned a disputed oil field to OAO Sidanco, in which BP bought a 10 percent stake for $484 million in 1997. TNK gained control of the Sidanco production assets after a forced bankruptcy sale.

To contact the reporter on this story: Greg Walters in Moscow gwalters1@bloomberg.net

Last Updated: June 25, 2008 12:25 EDT