By SELINA WILLIAMS and JAMES MARSON
Russian energy giant OAO Rosneft on Monday reached separate
agreements to buy the entirety of oil venture TNK-BP from BP
and a group of Soviet-born billionaires, an acquisition that
promises to reshape the Russian oil industry in favor of the
"The acquisition of 100% of TNK-BP represents a unique and
compelling strategic opportunity for Rosneft," both in creating
extra value in an enlarged company and in securing an alliance
with an experienced international company like BP, the company
said in a statement Monday.
Under the terms of the transaction, BP will receive $17.1
billion in cash for its 50% stake plus shares representing
12.84% of Rosneft, worth $9.7 billion on the bid date.
It will then use $4.8 billion of that cash to purchase an
additional 5.66% of shares Rosneft from the Russian government,
taking its total holding up to 19.75%, BP said in a
Signing of the definitive agreements between BP and Rosneft
is conditional on the Russian government agreeing to the sale
of the 5.66% stake in Rosneft, BP said.
BP will get two seats on Rosneft's nine-person board as part
of the deal and expects to be able to account for its share of
Rosneft's earnings, production and reserves on an equity
Rosneft also said Monday it has agreed "heads of terms" with
AAR, the consortium that holds the Soviet-born billionaires'
stake in TNK-BP, to acquire the other half of the company for
$28 billion, without providing further details.
"This is a good, big deal, not only for the Russian energy
sector, but also for the Russian economy," said Russian
President Vladimir Putin, after a meeting at which he approved
Rosneft's acquisition of TNK-BP in a meeting with the company's
CEO, Igor Sechin, Russian news agency Interfax
Rosneft will finance the transactions, which have a total
cash value of $45.1 billion, from a combination of existing
cash resources and new borrowings, it said. "No concessionary
financing from government sources will be required," and
Rosneft will sustain its dividend policy, it said.
The deal marks a historic shift in BP's presence in the key
Russian oil market, freeing it from a turbulent joint venture
with AAR and potentially giving it access to Arctic oil
exploration rights that are widely coveted by companies seeking
to replace dwindling oil resources elsewhere.
The transaction enables BP to reap a windfall from the sale
of their stake in Russia's third largest oil producer, which
they paid around $8 billion for in 2003, but which has returned
around $19 billion in dividends.
The deal is also a vindication for BP CEO Bob Dudley,
who suffered a major setback last year when his previous effort
to partner with Rosneft was blocked by opposition from AAR,
which holds the other 50% stake in TNK-BP.
"This investment builds on BP's track record of value
creation in Russia. It is consistent with our strategy of
deepening our positions in the world's most prolific oil and
gas regions," Mr. Dudley said Monday.
A Rosneft takeover of TNK-BP would bring the Russian state's
control over oil production to nearly 50% and mark a major
milestone in Mr. Putin's reassertion of Kremlin control over
the strategic oil sector, much of which was sold off in the
privatizations of the 1990s to well-connected tycoons like
Since Mr. Putin came to power in 2000, the tide has turned the
other way in an industry the Kremlin depends on both as a
source of international influence and more than half of all tax
Dow Jones Newswires