BP to sell half-share in Russian joint venture

BP PUT its half-share of its huge Russian joint venture up for sale yesterday, a bold step that would abandon nearly a third of BP’s output, cut it loose from hostile partners and let the Russian state tighten its grip on the world’s biggest oil industry.

A sale of its half stake in TNK-BP could raise around $30 billion for BP, which would help to fund the ongoing cost of cleaning up the 2010 Gulf of Mexico oil spill and allow it to invest in higher growth deals.

It also signals a reorganisation of the oil industry in Russia, the world’s top producer, where Vladimir Putin returned to the presidency this year with stern views about foreign firms holding strategic assets.

TNK-BP is Russia’s third largest oil producer, and BP’s stake represents one of the biggest foreign investments ever made in the country. It has earned BP huge profits but has long been plagued by acrimonious legal battles between BP and its Russian partners, the AAR consortium of billionaires.

For BP, selling out would mean giving up annual dividends that hit $3.7 billion last year and losing around 30 per cent of its oil and gas production, but it would free it to explore higher-growth ventures elsewhere.

The London-based group said it had received “unsolicited approaches” but declined to name its suitors.

Given the Kremlin’s desire to exert influence over the oil sector, analysts and bankers immediately identified state-backed players, and especially Rosneft, as the most likely buyers.

“We believe that the eventual buyer will have to be Russia – a 2 million barrels per day company is just too strategic for Russia to let fall into foreign hands,” said Oswald Clint, oil analyst at Bernstein.

Last week, powerful former deputy prime minister Igor Sechin was appointed chief executive of Rosneft with a goal to transform the company into a national champion capable of competing on a global scale.

Analysts welcomed the potential sale. “BP should exit and reinvest in more profitable areas with less political risk, if it can achieve something close to fair value for the stake,” Iain Reid, oil analyst at Jefferies, said. – (Reuters)