BP’s Russia venture buyout ‘unlikely’

BP is not expected to attempt a buyout of its oligarch partners in its Russian venture TNK-BP anytime soon, if at all, banking and industry sources said.

It was reported that BP was working over the weekend with state-controlled Rosneft to buy out the billionaires who own half of TNK-BP, while yesterday’s Financial Times said BP would this week seek Russian government approval for such a move, either alone or with Rosneft.

While a buyout would end a legal spat between the two sides, industry sources played down the chances of a buyout, saying the likely cost was a challenge to BP when it was selling assets to pay the $42bn (£25bn) cost of the Gulf of Mexico oil spill.

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TNK-BP, Russia’s number three oil company, has a market capitalisation of $50bn and analysts said the Russian shareholders could seek over $30bn for their stake.

Banking sources said there was no indication either BP or Rosneft were actively interested in buying out the billionaire shareholders.

“As far as I’m aware there isn’t a whole load of cash being raised to buy out that 50 per cent stake in TNK-BP,” one senior investment banker said.

If BP paid the oligarchs in shares, and also proceeded with its plan to issue a 5 per cent stake to Rosneft, as part of its Arctic exploration tie-up, this would mean the Kremlin and Russian billionaires owned a quarter of the company – an unwelcome prospect for many BP investors. Also, BP taking majority control of TNK-BP would be at odds with Russian policy on oil investment which has been to offer foreigners only minority interests in large assets.