Rosneft and BP have announced a deal worth over $25 billion that could give the British oil company a stake of between 16 and 20% in the state-controlled Russian energy firm.
The agreement, yet to be finalised but which could be made public on Monday or Tuesday folds BP’s half of TNK-BP, Russia’s third-largest oil company, into Rosneft in exchange for cash and Rosneft stock.
It allows BP to end a stormy relationship with its partners in the venture, 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 be finalised and survive a months-long approval process, BP’s exposure to Russia would be lower, but it could secure it seats on the Rosneft board and closer ties than any of its rivals to Igor Sechin the chief executive of Rosneft, who has a significant say in energy policy.