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The Failure of BP-Rosneft Deal
May 20, 2011 15:16

BP's and Rosneft's deal for $16 billion collapsed. Russian state-owned company is out of the agreement with BP due to the refusal of the Russian shareholders of TNK-BP to sell its stake in the company, at this moment Rosneft is searching for the new partners.

At the beginning of the year Rosneft and BP agreed on a strategic partnership. The new alliance, which has been supposed to be a new chapter in the history of the Russian oil industry, should provide the exchange of shares amounting to 16-17 billion dollars and joint development of the Arctic. Rosneft was supposed to get a 5% stake in BP in the exchange for its 9.5%.

As the result of the deal BP, the company, affected by the accident in the Gulf of Mexico in 2010, would have reached new markets and Rosneft could obtain a good partner with all necessary technology for the offshore operations as well as its "assets-cleaning", formed from the remaings of the former Yukos empire of Mikhail Khodorkovsky.

But the deal collapsed as the consortium AAR (Alfa-Group, owned by Mikhail Fridman, Renova owned by Viktor Vekselberg and Access Industries owned by Leonard Blavatnik) achieved its prohibition through the court. In its statement the AAR consortium claimed that BP may operate in Russia only through TNK-BP.

As a result, TNK-BP pretended to develop the Kara Sea in place of the British shareholder. It did not suite Rosneft, Russian company and British BP started negotiations to buy out the share of AAR in TNK-BP.

One option to resolve the situation was an intermediate stage on which Rosneft will have 25% of TNK-BP's stake plus one share and BP would increase its stake up to 75% minus one share. In the future Rosneft and BP planned to exchange shares: Rosneft would have hold 75% and 25% would have gone to BP.

The British company offered $27 billion for the AAR stake but Russian shareholders said that its worth is more than 30 billion dollars.

According to the Oil And The Glory, the companies "had agreed on a $32 billion buyout. But in the end, the deal was upended by deep-seated mistrust between the Russians - those at Rosneft, and the four oligarchs. In terms of the sequence of events, AAR wanted its cash first, before BP and Rosneft proceeded with their tie-up; Rosneft rejected that idea, and wanted the oligarchs to be paid only after the rest of the deal went through. They failed to bridge the gap, and the deal died".

Now Russian shareholders will take a month before deciding how to develop Arctic oil fields wihouth BP partner. Igor Sechin, Deputy Prime Minister, says that Rosneft view the British BP as an important figure and will intend to work with it again. In addition, he stressed, that BP has already recieved some other Arctic offers to work with and would take some time to think it over.

According to the Bloomberg, "the BP-Rosneft alliance itself is "interesting if one can distance oneself from the difficulties that arose," said Russia President Medvedev, adding that he’d be happy if it "works out in the end".


Tags: Russian companies Russian business Russian oil Rosneft  

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