Rosneft bids for BP’s stake in a Russian-British oil venture

Russia’s state-owned oil company Rosneft is reportedly looking to buy out all of TNK-BP, and letting representatives of BP into its board.

The long lasting saga about the future of one of the world’s leading oil companies, the Russian – British venture TNK–BP, seems to be coming to an end. On Friday BP will make a choice on who it will sell its 50% stake in TNK-BP to. Rosneft now seems to be the main bidder, as the company’s head Igor Sechin will discuss the deal on Thursday in London with BP’s CEO Robert Dudley, says the Financial Times. Reports say that Russia’s oil major should pay around $28bln for the deal, where about $15bln – $20bln would be cash and the remainder will be compensated by Rosneft shares. Overall, the British oil company could get about 20% in Rosneft, FT adds.

Should Rosneft close the deal, it will become the biggest producer of oil in the world. The company would extract about 3.15mln barrels of oil daily, while America’s ExxonMobil extracts 2.3mln barrels a day.

The news follows reports the AAR consortium which is the oligarch managed Russian part in the TNK–BP venture – decided to sell its 50% stake to Rosneft. The Alfa Access Renova consortium (AAR) would get about $28bln from Rosneft, according to Sky News.

AAR and BP have been involved in a corporate dispute for about 4 years, where disagreements over corporate governance became a major sticking point. Both sides were finding the situation increasingly acrimonious and have been looking of ways to get out the joint venture.

In June 2012 BP made it clear it wanted to leave the TNK–BP joint venture, AAR mulled buying out BP’s stake to become a 100% owner. However, AAR was clear that it didn’t want to cooperate with Rosneft – the other bidder for the stake.

“What we are concerned about is that if Rosneft buys BP's stake outright, then we would be in a 50/50 joint venture with a Russian state company as the other investor,” that wouldn’t need our knowledge and use us just as a financial investor, Stan Polovets, AAR Chief Executive, explained then.

Rosneft is 75% owned by the Russian government, and was a mid-sized Russian oil company before becoming the country's second-largest oil producer after buying up the most lucrative assets of Yukos, an oil company which was declared bankrupt following the jailing of its billionaire owner Mikhail Khodorkovsky.