Deal signed to end oil company feud

September 4, 2008
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, MOSCOW, September 4  – British and Russian shareholders signed a deal Thursday ending a long-running feud for control of joint oil venture TNK-BP that had unnerved investors, statements from the two sides said.

The agreement, which envisages the departure of British chief executive Robert Dudley by year\’s end, is "a sensible means of resolving a situation that could not continue without causing serious damage" to TNK-BP, said BP chief executive Tony Hayward in a statement.

In a separate statement from the Russian side, leading shareholder Mikhail Fridman said the agreement "opens fundamentally new opportunities for development of TNK-BP."

The dispute between British and Russian shareholders in TNK-BP, Russia\’s third largest oil producer, was seen as a test of Russia\’s business climate under new President Dmitry Medvedev.

Because TNK-BP accounts for a quarter of BP\’s production, the row also raised speculation about BP\’s own prospects and talk of an ownership shake-up at the British company.

Much of TNK-BP\’s British management including Dudley has been forced out of Russia under pressure from immigration and labour authorities.

Thursday\’s agreement envisaged a shake-up of the management structure of the firm but no change in the shareholder structure, in which the British and Russian sides each own 50 percent of the company.

It also envisages a public floatation of up to 20 percent of a TNK-BP subsidiary, the BP statement said.

Dudley\’s departure was a key demand of the Russian shareholders who accused him of running the company purely in accordance with BP\’s interests and hindering its international expansion.

Under the agreement, BP will nominate an independent chief executive for approval by TNK-BP\’s board, the two sides said.

TNK-BP has been badly hit by the row, which had aggravated strained relations between Britain and Russia.

Russia\’s Vedomosti newspaper quoted one expert as saying the company was currently undervalued by 40 percent on the markets as a result of the frictions.

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