- Title: RUSSIA: Putin blesses full takeover of TNK-BP by Rosneft
- Date: 22nd October 2012
- Summary: MOSCOW, RUSSIA (RECENT) (REUTERS) VARIOUS OF KREMLIN
- Embargoed: 6th November 2012 12:00
- Keywords:
- Location: Russian Federation
- City:
- Country: Russia
- Topics: Politics
- Reuters ID: LVAE4E9OKZNWTPBK8A5VT1AD6ZMK
- Aspect Ratio:
- Story Text: Russian President Vladimir Putin on Monday (October 22) blessed a full takeover by state oil major Rosneft of Anglo-Russian oil venture TNK-BP, calling it a very good signal for the Russian market.
Putin was speaking at a meeting with Rosneft CEO Igor Sechin, who said Rosneft had agreed to buy 100 percent of TNK-BP from its shareholders, British oil major BP and the AAR consortium representing four Soviet-born tycoons.
"We definitely support the idea of consolidation of these assets under one management. For us it's very important that these assets function according to one and the same plan with Rosneft, because only in this case a significant synergy is created which provides a sharp increase of work efficiency at a number of oil fields," Sechin told Putin during a meeting on Monday at the Russian president's residence Novo-Ogaryovo.
In a statement Rosneft said it would pay $28 billion for AAR's one-half stake in TNK-BP, which Sechin said would be comparable in value to the cash and stock deal buyout of BP's stake.
The first part of the Kremlin-backed agreement announced by Rosneft on Monday folds BP's half of TNK-BP, Russia's third-largest oil company, into Rosneft, in exchange for cash and Rosneft stock in an agreement worth about $27 billion including $12.3 billion of cash and the rest in stock.
In stage two, AAR would get $28 billion in cash, but the two deals are independent of each other and the AAR deal is still subject to negotiations, Rosneft said.
With the whole of TNK-BP on board, Rosneft, which is already Russia's top oil producer, will control nearly half of Russia's oil output and pump more oil and gas than Exxon Mobil, the world's top international oil company.
The deal gives Rosneft extra output and cash flow to finance exploration of Russia's vast reserves to replace ageing and depleting fields. It keeps BP's expertise in Russia and provides the "quality" private shareholder President Vladimir Putin wants in order to show his critics he is pursuing a real privatisation agenda.
"This is a very good signal for the Russian market, for the world energy market, and is another proof of our partners' trust in the Russian market," Putin told Sechin.
It allows BP to end a stormy relationship with AAR, and to pursue closer ties with a Kremlin that exerts a much tighter hold on the oil industry than it did in the 1990s when BP first invested in Russia.
TNK-BP is highly profitable and provides a quarter of BP's total production, but its fields are mature, and the Soviet-born tycoons who own the other half through AAR have blocked BP's search for growth in Russia through closer ties with Rosneft.
Executives at TNK-BP have in the past had run-ins with Russian law enforcement at times of friction between the shareholders, with two managers arrested in 2008 amid a dispute over strategy that forced then-CEO Bob Dudley, who now heads BP, to flee Russia.
Should the deal survive a months-long approval process, BP's exposure to Russia would be lower, but with seats on the board it has closer ties than any of its rivals to Sechin, who has a significant say in energy policy.
The four tycoons of AAR, are reluctant to remain in a joint venture with the politically powerful Russian state oil company. - Copyright Holder: REUTERS
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