Russian shareholders may exit TNK BP

February 4, 2011

, MOSCOW, Feb 4, 2011 – The Russian shareholders of TNK-BP are considering selling their stake in the Russian-British oil joint venture to the Russian state or BP\’s partner state-controlled Rosneft, a report said Friday.

TNK-BP is jointly owned 50 percent by the British oil giant and 50 percent by its Russian shareholders — a consortium of three Russian businessmen including billionaire banker Mikhail Fridman.

The Vedomosti daily, quoting concurring sources close to TNK-BP, the Russian government and Rosneft, said no final agreements have been reached but the mechanics of a possible transaction have already been worked out.

If confirmed, such a move would mark a dramatic further development in BP\’s new partnership with Rosneft which last month saw the two firms found a joint venture for Arctic exploration and take a cross holding.

A spokesman for Russian shareholders, known collectively as Alfa Access Renova (AAR), declined to comment but Rosneft issued a swift initial denial of the report.

"We are and were not in negotiations about buying AAR\’s stake or TNK-BP itself. Of course not," chief executive Eduard Khudainatov told the Interfax news agency.

Vedomosti said Rosneft could acquire a controlling stake in TNK-BP by also taking an additional 1 percent from BP itself to have the majority in the company.

It said a potential problem could be that AAR would be seeking a premium to the current market value of TNK-BP.

They have put the total worth of TNK-BP as $60 billion but Rosneft would want a discount to the current market price, Vedomosti said.

The report comes after The High Court in London on Tuesday granted a request by the Russian shareholders to halt the BP-Rosneft deal after they complained it violated the TNK-BP shareholder agreement.

AAR has said that under the terms of the agreement BP does not have the right to pursue joint projects in Russia with an entity other than TNK-BP.

Analysts at Renaissance Capital said in a note to clients that the acquisition would be positive for Rosneft but its implementation could prove difficult.

"BP probably does not need two separate vehicles for its operations in Russia," they said, pointing to the potential problems if BP uses its TNK-BP dividend to invest in the Rosneft Arctic joint venture.

Vedomosti said that the complaint filed by AAR could be a tactic aimed at getting better terms for its eventual sell-out to Russia or the Russian state.

TNK-BP almost imploded during a venomous shareholder conflict in 2008 but its co-owners then made peace and it is seen as one of the crown jewel assets of the British company.

Ironically, the BP-Rosneft deal was signed by BP\’s new chief Robert Dudley — the same executive who was booted out of Russia in 2008 at the height of the row between Moscow and London over TNK-BP.

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