BP agrees to sell its shares in the Anglo–Russian oil joint–venture TNK–BP to Russia's oil giant Rosneft. The British oil company will receive a mixed payment of US $ 17.1 billion in cash, and shares representing 12.84 per cent of Rosneft. Part of that money shall be used to acquire further Rosneft shares, company speakers explained.
“This is an important day for BP. Russia is vital to world energy security and will be increasingly significant in years to come. Russia has also been an important country for us over the past 20 years. Our involvement has moved with the times. TNK-BP has been a good investment and we are now laying a new foundation for our work in Russia,” explains BP’s chairman Carl-Henric Svanberg.
A good investment indeed: Although the relationship between BP and its Russian partners, several oligarchs, was troubled at best, BP had entered the joint–venture with a US $ seven million investment. Although the British will now have to reduce their ambitious plans for crude oil production in Russia, they could hold a 19.75 percent of Rosneft shares on completion of the proposed transaction – plus further US $12.3 billion in cash.
BP–Rosneft Deal Could Give British Roughly 20 Percent in Russia's Oil Giant
At this level of ownership, BP expects to be able to account for its share of Rosneft’s earnings, production and reserves on an equity basis. In addition BP expects to have two seats on Rosneft’s nine person main board.
Signing of the definitive agreementsis conditional on the Russian government agreeing to the sale of the 5.66 per cent stake in Rosneft and it is intended that the TNK-BP sale and this further investment in Rosneft would complete on the same day.
BP Expects Good Returns from Russian Oil Deal – A Stake in Russia?
“Rosneft is set to be a major player in the global oil industry. This material holding in Rosneft will, we believe, give BP solid returns. We consider that this is a deal which will deliver both cash and long term value for BP and its shareholders. It provides us with a sustainable stake in Russia’s energy future and is consistent with our Group strategy,” Svanberg added. BP intends to retain the shares resulting from the proposed transaction, and will evaluate how the cash proceeds will be utilised. The company further encourages a complete takeover of TNK–BP by Rosneft... more on page 2!
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