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Rosneft closes in on TNK-BP

Thursday, October 18, 2012 - 02:35

Oct.18 - State oil company Rosneft tightened its grip on the Russian oil industry on Thursday, lodging a cash and shares bid for British oil company BP's 50 percent stake in the country's third-largest oil producer, TNK-BP. Hayley Platt report

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Executives were saying nothing at BP's headquarters but inside part of $50bln deal was reportedly being formulated. If agreed it will give the state-owned Russian oil giant Rosneft supermajor status. A $25bln bid has apparently been submitted to buy BP's half stake in its Russian joint venture TNK-BP. Rosneft's already made a matching offer for the other half from AAR, a consortium owned by four Russian oligarchs. Based on last year's figure the combined group would be able to pump an estimated 3.15 million barrels of crude oil a day - three quarters of a million more than it's nearest rival. Last year it's output was roughly the same as PetroChina. The deal is reportedly the second largest ever in the oil industry and it will help President Putin regain state control of Russian assets. But Neil Shearing of Capital Economics says it won't necessarily be good for investors. SOUNDBITE: Neil Sheering, chief economist, emerging markets, Capital Economics: "Whether or not the creeping influence of the Russian state over these incredibly important sectors to the Russia economy is a good thing for investors remains to be seen. I rather suspect it isn't necessarily a good thing. Things may turn sour, particularly if oil prices start to fall." BP's partnership with Russia's privately owned TNK began in 2003. It invested $8bln and earned $19bln in dividends. But it hasn't been a happy marriage - largely thanks to disputes with AAR. BP CEO Bob Dudley knows all about that - he was kicked out of Russia in 2008 when he was head of TNK-BP. Richard Hunter from Hargreaves Lansdown says Dudley will be particularly keen to seal a deal. SOUNDBITE Richard Hargreaves, Head of Equities, Hargreaves Lansdown, saying (English): "Whilst it's been something of a cash cow for the company it has also taken up a great deal of management and strategic time because of the political nature of the holding." The bid is a cash and shares one. In exchange for a highly profitable company BP and the oligarchs could emerge with minority stakes in an enlarged Rosneft plus billions of dollars in cash. But it could be weeks before a deal is finalised and it will need government approval. Some analysts also say Rosneft may struggle to finance the deal. Hayley Platt, Reuters.

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Rosneft closes in on TNK-BP

Thursday, October 18, 2012 - 02:35