BP in last minute efforts to save Rosneft deal
14 April 2011
BP PLC late last night was trying for a last-minute reprieve for its troubled $16-billion oil exploration deal in the Russian Arctic, even as indications emerged that the Russian state oil company could replace it with another partner.
The last minute efforts to save the deal came with BP facing a deadline today over its alliance with OAO Rosneft. The two companies were discussing an extension of a month to the deadline which BP hoped would leave it some time to find a way out of an embarrassing impasse that was reflecting adversely on a deal by its new chief executive Bob Dudley's first major deal.
The situation late Wednesay was that the alliance with Rosneft was fraught with problems with Russian partners seeking a replacement for BP in the landmark Arctic exploration alliance the two companies struck in January. Under the deal the two companies would swap shares worth $16 billion in exchange for the right to search for oil together in a hydrocarbon-rich part of the Russian Arctic. (See: BP signs $7.8-bn strategic alliance with Roseneft for Arctic resources)
The alliance, however, has run into trouble with BP's partners in another Russian joint venture, TNK-BP, a group of billionaires collectively known as AAR, who claim that the BP-Rosneft alliance violated the terms of their shareholder agreement with BP, under which both partners can pursue investment opportunities in Russia only through TNK-BP. They followed up with winning a series of legal victories put a spanner in the BP-Rosneft deal.
This week, BP engaged AAR in talks aimed at buying the oligarchs out of their stake, to unblock the Rosneft deal. However, the talks broke down, putting paid to BP's hopes.
The two sides were never close to any agreement on a valuation for AAR's stake. AAR insisted that the whole of TNK-BP was worth least $70 billion with $35 billion premium on their 50-per cent stake.