BP to create world’s largest listed oil producer with Russian oil company Rosneft

BP is on the verge of signing a deal with Russian state-owned oil company Rosneft through which Rosneft will take control of the joint venture TNK-BP and BP will get a major stake in what is touted to be the world’s largest listed oil producer.

The BP Rosneft deal came after Rosneft signed a preliminary deal with AAR on Tuesday, to buy their 50% stake in the venture for $28 billion. AAR owns the other half of TNK-BP. The AAR Rosneft deal goes through, would give two options for BP – to sell its stake to Rosneft or to remain in TNK-BP with Rosneft as its new partner.

BP’s chief executive Bob Dudley was on Wednesday night in talks with Rosneft chief executive Igor Sechin over a sale, but BP would regard either outcome as a lucrative option of gaining a foothold in Russia.

The BP board will meet on Friday to discuss it options, while addressing issue of how Rosneft could finance a complete buy-out. BP had been longing for a strategic partnership with Rosneft and last year agreed a wide-ranging alliance with oil company Rosneft to gain access to the Russian Arctic. BP felt humiliated when Russian oil company Rosneft signed the deal with arch rival AAR.

BP shares rose 3% hoping that the company was finally going to gain foothold in Russia. If oil company Rosneft plans to buy all of TNK-BP, it would become the world’s largest listed oil producer by far, strengthening its position as Russia’s undisputed national oil producer. BP would receive shares in oil company Rosneft in part-exchange for its TNK-BP stake, which is likely to include 12.5% of existing shares held in treasury by Rosneft.

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