BP, Russia ink $61 billion mega accord

LONDON - Agence France-Presse

Russia’ Putin (L) meets CEO Sechin of Rosneft, which inks huge BP deal. REUTERS photo

Russia’s state-controlled integrated oil company Rosneft gobbled up BP’s highly-profitable Russian joint venture, securing itself a place among top players in the global fuel sector due to a $61 billion (47 billion euro) deal yesterday that gives the BP nearly a fifth of the Russian energy giant and ensures access to key Arctic resources.

After days of bargaining, British BP said in a statement that it has agreed to sell its half of Russian venture TNK-BP to Rosneft for $17.1 billion and another 12.84 percent share in the state firm.
BP added it would spend $4.8 billion of the proceeds to buy another 5.66 percent of Rosneft from the Russian government, bringing its total stake in the company to 19.75 percent. BP currently owns 1.25 percent of Rosneft.

The shake-up has major implications for the exploration of oil and gas in the vast Arctic region, while helping to firm up BP’s plans to refocus its attention away from the United States after the 2010 oil spill disaster.

In Moscow, Rosneft announced it had also bought the other 50-percent in TNK-BP from key Russian investors for $28 billion. Rosneft chief executive Igor Sechin estimated the total value of the deal at $61 billion.

Putin praises deal

“This is a good, large deal that is necessary not only for the Russian energy sector but also the entire economy,” news agencies quoted Russian leader Vladimir Putin as saying.

“This is a very good signal to the Russian and international energy markets,” Putin said.

BP will pay the Russian government $8 per Rosneft share, representing a premium of 12 percent to the closing price on Oct. 18.

BP would also have two seats on Rosneft’s nine-person board. Subject to regulatory approvals, the transactions are expected to complete during the first half of 2013.

“BP today announced that it has signed heads of terms to sell its 50 percent share in TNK-BP to Rosneft,” the statement said.

“Signing of the definitive agreements is conditional on the Russian government agreeing to the sale of the 5.66 percent stake in Rosneft.” it said. “Therefore, on completion of the proposed transaction, BP would acquire a total 18.5 percent stake in Rosneft and net $12.3 billion in cash.

“This would result in BP holding 19.75 percent of Rosneft stock, when aggregated with BP’s 1.25 percent current holding in Rosneft.” BP chief executive Bob Dudley said the deal “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.