BP may use sale proceeds from TNK-BP to boost stake in Russia's Rosneft


LONDON -- BP said Friday it aims to stay in Russia for decades to come and could use some of the proceeds from the potential sale of its stake in joint venture TNK-BP to increase its holding in Russian oil giant OAO Rosneft.

BP said it wanted to continue its investments in Russia regardless of whether it sells its 50% stake in TNK-BP to Rosneft or to the group of Soviet-born billionaires who own the other half of the joint venture.

The comments illustrate the UK-based energy company’s desire to retain a significant presence in oil-rich Russia, despite a plan to exit the turbulent, yet highly profitable TNK-BP joint venture.

Completion of such a deal would also be an important achievement for BP CEO Bob Dudley, who saw a landmark 2011 pact with Rosneft to explore for oil in Russia's Arctic thwarted by the TNK-BP partners.

TNK-BP is Russia’s third-largest producer of crude oil and has contributed a significant proportion of BP's earnings since its creation in 2003.

But the joint venture has also been a source of great turmoil for the UK company because of long-standing disagreements with the billionaire partners who control the other half of TNK-BP through the Alfa Access Renova consortium, or AAR.

BP’s commitment to Russia follows a meeting Tuesday involving Mr. Dudley, BP chairman Carl Henric Svanberg, Rosneft CEO Igor Sechin and Russian President Vladimir Putin.

“If we're successful at selling our stake, we’d be interested in buying a share in Rosneft,” a BP spokesman said. BP already owns 1.3% of Rosneft.

“We are pleased with BP's decision to reinvest part of the funds from the sale of its stake in TNK-BP in new projects in Russia, including in Rosneft shares,” Mr. Sechin said earlier Friday, according to a report by Russian news agency Interfax.

Mr. Sechin added that Rosneft could raise the cash to acquire BP’s stake in TNK-BP on capital markets.

Analysts have said that Rosneft could pay for the stake, which is worth an estimated $25 billion, with a mix of its own shares and cash.

Rosneft could pay $10 billion to $15 billion in cash for BP’s stake in the joint-venture and the rest in shares, resulting in BP acquiring at least a 12.5% stake of Rosneft, Russian newspaper Kommersant reported this week.

The BP spokesman said that talks on the sale of its share of TNK-BP are continuing and it isn't definite that Rosneft will be the buyer or how a final deal might look.

BP is also talking to AAR, which has expressed an interest in acquiring some of BP’s stake in the company. BP is obligated under its agreement with AAR to negotiate in good faith for a period of 90 days that started on July 18, after which it can sell to whomever it chooses.

AAR has some history with Rosneft. The consortium blocked in the courts plans for a broad alliance between BP and Rosneft that would have seen the two companies swap share holdings in each other and jointly explore for oil in the Arctic.

Dow Jones Newswires

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