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DealBook: BP’s Chief Meets With Russian Leaders on Joint Venture

September 19, 2012 by Leave a Comment

Clockwise from left,  Russian President Vladimir Putin; an unidentified interpreter; Carl-Henric Svanberg, the chairman of BP;  Robert  Dudley, BP's chief executive; and  Igor Sechin, the Rosneft chairman. The officials met on Tuesday at the Black Sea resort of Sochi.Alexei Druzhinin/RIA Novosti Kremlin, via Associated PressClockwise from left,  Russian President Vladimir Putin; an unidentified interpreter; Carl-Henric Svanberg, the chairman of BP;  Robert  Dudley, BP’s chief executive; and  Igor Sechin, the Rosneft chairman. The officials met on Tuesday at the Black Sea resort of Sochi.

MOSCOW — BP may finally be close to resolving a long-running business dispute over its joint venture in Russia.

Although the government provided few details of their discussion, the chief executive of BP, Robert W. Dudley, met with President Vladimir V. Putin of Russia on Tuesday as BP tries to extricate itself from a nine-year-old partnership called TNK-BP.

The joint venture is vital for the British oil company, providing about a quarter of its total global oil production – about the same as the United States, where its business is overshadowed by lawsuits stemming from the oil spill.

But BP and its partners in the business, a trio of Russian billionaires, have been fighting for years. The billionaires are also suing BP for billions of dollars in damages for what they say was the oil company’s violation of the shareholder agreement underlying TNK-BP.

Igor I. Sechin, the chief executive of Rosneft, the state-owned Russian oil company, was also at the meeting, which was held at the presidential resort in Sochi. Rosneft reportedly has asked banks for $10 billion to $12 billion in financing for the purchase of BP’s stake in TNK-BP.

“During the meeting, BP reiterated its long-term commitment to Russia and provided assurances that while the company is looking to exit its investment in TNK-BP it is not exiting Russia,” BP said Wednesday.

In its own statement, the Kremlin said Mr. Putin discussed “the continuation and expansion” of BP’s business in Russia.

Meetings between chief executives and Mr. Putin, who personally oversees major deals in the oil sector, often telegraph coming agreements. Mr. Dudley appeared in a photograph with Mr. Putin in 2010, a few months before BP and Rosneft announced a deal to explore for oil in the Russian sector of the Arctic Ocean. That agreement was scrapped when BP’s partners in the Russian joint venture filed their lawsuit.

TNK-BP manages oil fields in Siberia that are aging but still profitable. If BP exits the joint venture, it would be free to join the race to explore for oil in the Russia’s area of the Arctic Ocean, a venture that could eventually be much more lucrative.

Exxon Mobil, the largest American oil company, Eni of Italy and Statoil of Norway already have agreements to explore for oil off the northern coast of Russia.

Any sale of BP’s stake in the joint venture to a third party like Rosneft would have to wait at least until mid-October. That is when a three-month period expires during which BP is obliged to negotiate the sale of its stake in TNK-BP to its Russian partners.

Rosneft and BP’s partners in TNK-BP declined to comment.

Selling the stake would also help shore up BP’s finances, which are being stretched by settlements of the lawsuits related to the Gulf of Mexico disaster. It would also fit the “shrink to grow” strategy BP has announced. Earlier this month, BP sold oil fields under the Gulf of Mexico to Plains Exploration and Production for $5.5 billion. The British oil giant is also negotiating to sell a refinery in Texas City, Texas, to Marathon Petroleum, The Financial Times reported Wednesday.

But is it not certain that BP will sell its stake in TNK-BP. Even after the spill in the Gulf of Mexico, BP has negotiated both to buy out its billionaire partners and to sell its own interest to them.

Debtwire, a trade publication covering distressed debt and leveraged finance, reported that Rosneft has approached banks for loan offers to buy a stake in TNK-BP. Bloomberg reported it is for BP’s share.

Stanley Reed contributed reporting from London.

Article source: http://dealbook.nytimes.com/2012/09/19/bps-chief-meets-with-russian-leaders-on-joint-venture/?partner=rss&emc=rss

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BP Offers Plan to Salvage Its Swap Deal With Rosneft

May 7, 2011 by Leave a Comment

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

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BP Offers Plan to Salvage Deal with Rosneft

May 6, 2011 by Leave a Comment

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, however, must be approved by Rosneft, which did not return calls seeking comment.

BP hopes the concession ends 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 may 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 would contribute 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. That would mean 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, a spokesman for the group of TNK-BP shareholders, said they 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 — 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

Filed Under: Business News Tagged With: , ,