Russian oil titan Rosneft has reportedly tabled a $25 billion (£15.6bn) offer to BP for its 50 per cent holding in the country’s third-largest oil producer, TNK-BP.
The deal would give BP between $15bn and $20bn in cash (£9.3bn-£12.5bn) in addition to a 10 to 20 per cent stake in Rosneft. The BP board is expected to reach a decision over the weekend.
The deal would be seen as a favourable exit for BP from what has been a lucrative but very testing venture.
BP formed TNK-BP with AAR, a consortium of Russian oligarchs, in 2003. Returns have been vast, the oil giant invested $8bn (£5bn) into the venture and has so far received roughly $19bn (£11.7bn) in dividends.
But the board has been locked in a constant grapple with the AAR tycoons, who repeatedly obstructed attempts by BP to expand their ventures in Russia, securing a High Court injunction to block plans for BP to enter joint-exploration with Rosneft.
The shares appropriated by BP as part of the deal could go some ways to securing its future in Russia for decades to come, potentially ensuring that it will receive favourable exploration deals in the Arctic and North Sea. But there are concerns that BP will have little meaningful leverage over Rosneft, especially given the Russian state’s weariness over foreign investors.
An enlarged Rosneft will produce over 3 million barrels of oil per day, rendering it the world’s largest publicly-traded oil company.
However, this will also transfer a considerable slice of Russia’s private oil production into state hands, raising profound political concerns. The Kremlin holds a 75 per cent stake in the energy giant and Igor Sechin – the company’s CEO – currently serves as Russia’s deputy prime minister.
Rosneft has also expressed interest in buying the AAR oligarchs’ stake in BP-TNK, with the two parties signing a memorandum on Tuesday in which Rosneft agreed to buy its share for a fee similar to that offered to BP. However, the agreement is not legally binding and both parties have announced that no deal had yet gone through.
If deals with both BP and AAR materialise, Rosneft would be producing in excess of 4 million barrels of oil and gas a day – 1.7 million more than US-owned Exxon Mobil, which is currently the global energy market’s largest oil producer.