BP, Rosneft are about to announce a deal worth over $25 billion (£15.59 billion), which can see BP own a stake of between 16 and 20% in the state-controlled Russian energy firm Rosneft.
The BP, Rosneft deal which is likely to be announced today or tomorrow, will see BP gain cash and Rosneft stock, in exchange for half of TNK-BP. BP will receive $10 billion (£6.2 billion)-$14 billion (£8.7 billion) in cash from Rosneft and take shares in the Russian company in which it already owns a 1.25% stake after the partial sell-off in 2006.
BP’s stormy relationship with Rosneft’s partners in the venture, AAR, will come to an end with the the BP, Rosneft deal and enable BP to pursue closer ties with Rosneft, which exerts a much tighter hold on the oil industry than it did in the 1990s when BP first invested in Russia.
TNK-BP is highly profitable and provides a quarter of BP’s total production, but its fields are mature, and the Soviet-born oligarchs who own the other half through AAR have blocked BP’s search for growth in Russia through closer ties with Rosneft.
The BP, Rosneft deal is crucial to BP as it provides an exit from the TNK-BP venture which has posed a series of difficulties for the firm, including the departure of Bob Dudley from Russia in 2008 when he was head of the venture. It has required $8 billion of investment by BP which in turn has taken out $19 billion (£11.8 billion) in dividends.
Bob Dudley, the current chief executive of BP, has informed his board that he supports the cash and share deal for the 50% TNK-BP stake, which will eventually allow him to hand out billions to BP shareholders.