BP in Battle to Keep Its Accord With Rosneft Alive

 

Months of negotiations with Rosneft, the oil company controlled by the Russian state, and a group of Russian billionaires who are BP’s partners in its current joint venture, TNK-BP, have failed to come to a conclusion, BP said, without giving any details.

“A solution has not been found at this time, although talks will continue,” the BP statement said.

For BP, some analysts believe that much of its prospects for growth — and winning back investors — after the disastrous oil spill in the Gulf of Mexico depends on clinching the deal in Russia.

Under the arrangement with Rosneft, originally announced in January, BP would gain access to the Kara Sea, one of the icy backwaters of the Arctic Ocean that has recently attracted attention from the energy industry as a new oil frontier. But it quickly hit a legal snag when the Russian shareholders in TNK-BP, who operate through a holding company known as AAR, filed a legal action to block it.

A Monday midnight deadline passed without word from BP or Rosneft.

But the BP chief executive Robert W. Dudley said Tuesday that BP remained “committed to Russia, to working constructively with AAR in TNK-BP, and to our existing good relationship with Rosneft.”

“All parties have worked hard to reach an acceptable resolution, as we believe it could offer significant benefits to BP shareholders, to Rosneft, AAR and Russia,” Mr. Dudley said.

BP said previously that it had offered AAR a range of concessions, including cash and a part in the Rosneft deal, but without success. Some newspapers have reported that BP was locked in talks with AAR trying to buy the stake it does not already own in TNK-BP from the Russian investor group for more than $30 billion.

Mikhail Fridman, chairman of AAR, said Tuesday that the investor group remained “dedicated to the success of TNK-BP” and that “AAR is a long-term strategic investor, and we look forward to working with BP on delivering the next phase of TNK-BP’s growth, both in Russia and internationally.”

He added that the group planned “to continue discussions about potential collaboration among BP, Rosneft and AAR.”

A spokeswoman for Rosneft said the company might issue a statement later Tuesday.

AAR contended that BP had violated terms of the partnership in forging the agreement with Rosneft. An international arbitration court in Stockholm that has handled the AAR complaint ruled recently that BP-Rosneft could complete the part of the deal involving a stock swap, but would have to include TNK-BP in the Arctic exploration part of the agreement.

For the deal to proceed, Rosneft and BP would presumably have to renegotiate terms and either include TNK-BP or somehow buy out AAR’s stake.

Andrew E. Kramer contributed reporting from Moscow.

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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.

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