June 23, 2024

BP Offers Plan to Salvage Its Swap Deal With Rosneft

BP said it would agree to hand over a potentially lucrative exploration deal in the Arctic to its Russian joint venture, TNK-BP, in exchange for completing the share-swap, a move that would comply with a arbitration panel ruling released Friday. Any changes are subject to approval by Rosneft, which did not return calls seeking comment.

BP hopes the concession will end a three-month dispute with the Russian billionaires who are its partners in TNK-BP and who had opposed the Rosneft deal.

“This is a step in the right direction,” a spokesman for BP in London, Robert Wine, said. “It shows that there is an element of agreement.” BP’s shares rose 2.5 percent on Friday in London.

The partners had blocked BP’s $7.8 billion agreement with Rosneft, which included access to exploration blocks in Russia’s Arctic that might hold billions of barrels of oil. The partners argued that the deal breached their shareholder agreement with BP and demanded to be part of any new business in Russia.

BP’s deal with Rosneft initially lifted its shares because it promised to strengthen the British oil company’s position in the world’s biggest oil-producing country. It also guaranteed access to potential new oil reserves at a time of heightened competition and growing demand for oil. Handing the exploration deal to its joint venture would make it less profitable for BP.

The arrangement would cede some operational control over the venture in the Arctic Ocean to BP’s litigious Russian partners, even as BP contributed the technology to make it possible. The share-swap would still strengthen BP’s presence in Russia and could ease its participation in future oil deals.

It also highlights the significance of access to a site off Russia’s northern coast, given the lawsuits and environmental reviews stalling drilling on the other side of the Arctic Ocean in Alaska and Canada.

BP’s chief executive, Robert W. Dudley, came under pressure from some investors over the last month to find a solution to the standoff with the TNK-BP partners. The dispute had angered some investors, who had accused Mr. Dudley of misreading Russian politics and of failing to steer BP clear of difficulties so shortly after the oil spill in the Gulf of Mexico.

The company now has to seek approval from Rosneft to make the changes, which would include putting any shares that are part of the share swap in a trust. In that case, neither company would have any direct voting rights in the other. BP and Rosneft would also have no seats on each others’ boards.

Stan Polovets, chief executive of AAR, a firm that oversees the Russian partners’ holdings in TNK-BP, said his group welcomed Friday’s development. “We see the Arctic transaction with Rosneft as a great opportunity for TNK-BP and for Russia which we would like to succeed.”

He added that the “agreement provides a good way forward for achieving these priorities and opens the way to bring BP’s valuable expertise and technology to offshore exploration in Russia.”

BP’s Russian partners previously rejected cash offers from the company and said that its agreement with BP gave TNK-BP exclusive rights to pursue opportunities in Russia.

Despite the disagreements with its partners, TNK-BP remains a financial success for BP. After contributing about $6 billion in cash and assets to the founding of the TNK-BP venture in 2003, BP has since then made $14.3 billion in dividends from it, and it still retains 50 percent of the assets. The venture accounts for a quarter of BP’s production.

Andrew Kramer contributed reporting from Yekaterinburg, Russia.

Article source: http://feeds.nytimes.com/click.phdo?i=03fbd4bb8ab5d4d6b977451adc7d9e0f

Speak Your Mind