Rosneft, the Russian state-owned oil giant, has completed a $61bn deal to purchase TNK-BP, a joint venture the AAR consortium of Russian billionaires and the British oil company BP.
BP, which is selling its 50 per cent stake in TNK-BP, will receive $17bn in cash and a 12.84 per cent stake in Rosneft, enabling it to continue its 15-year involvement in the country’s energy industry.
TNK-BP has been highly profitable for BP but its fields are mature and AAR has previously blocked the UK cpmpany’s search for growth in Russia through closer ties with Rosneft.
Speaking to Russian television on Monday, Vladimir Putin, Russia’s president, said Igor Sechin, Rosneft’s chief executive, called the deal “a good big deal which is important not only for Russia’s energy sector but for the entire Russian economy”.
BP also plans to use part of the money accrued from the sale of Russia’s third-largest oil producer to raise its stake in Rosneft to 19.75 per cent.
Speaking to Al Jazeera from London, Julian Lee of the Centre for Global Energy Studies, said the original TNK-BP “was extremely profitable” and that those profits made the tenuous relationship between BP and its Russian counterparts more bearable for the oil giant.
In another development, Rosneft said it had agreed to buy the other 50 per cent in the joint venture from AAR, for $28b, and that the deal was “entirely independent of the transaction with BP”.
AAR confirmed that a memorandum of understanding has been signed, but added that it is still subject to other conditions.
Following the deal, Rosneft will surpass ExxonMobil to become the world’s largest publicly traded producer of oil and gas, in terms of output.
ExxonMobil’s latest earnings show its daily output at 4.2m, below the expanded Rosneft’s projected 4.6m.
Sechin told Russian news agencies following his meeting with Putin that Rosneft would probably use loans from foreign banks as well as funds raised from the sale of non-core assets to pay for TNK-BP.
Rosneft should expect to take over TNK-BP entirely within the next six months, he said.
Rosneft shares jumped more than three per cent on the announcement but rolled back to trade only 1.6 per cent higher at 218 rubles per share.
BP shares were down 0.3 per cent to 449 pence following the announcement.
Russia is an important part of BP’s business, accounting for a quarter of its oil production.
Bob Dudley, BP’s chief executive, has looked to the country’s vast oil resources as a key ingredient to the company’s recovery from the disastrous oil spill in the Gulf of Mexico in 2010.
Ildar Davletshin, an oil and gas analyst at Renaissance Capital, said the deal “strategically looks very positive for BP” which has replaced “a private partner for a strategic national company which has much bigger access to resources in Russia and has much bigger political support in this country”.
The UK firm is also set to have two seats on Rosneft’s nine-member board.
Despite that and having a near 20 per cent stake in Rosneft, BP will now have to worry whether “they are really going to have any influence over the way … in which the company is run”, said Lee.
Davletshin said the deal should help ease concerns that Rosneft’s strategy is driven by political considerations.
Rosneft has been involved in an array of overseas projects largely viewed as unprofitable but designed to prop up the Kremlin’s foreign policy.
Davletshin said Rosneft will more likely be run “in the interests of shareholders”‘ rather than serving the Kremlin’s political agenda considering BP’s two board members.
Sechin said Rosneft “would benefit from BP’s experience and its track record of implementing best international practices in Russia”.
Ratings agency Fitch last week warned Rosneft of a possible rating downgrade because of the TNK-BP deal.
Fitch said the Russian company should have no problems raising the money to pay for 50 per cent, but said the
purchase of the other 50 per cent could require so much borrowing that it could lead to a downgrade.