Skip to main content

BP chief executive Bob Dudley, left, speaks with Rosneft president Eduard Khudainatov before signing an agreement at BP headquarters in London Jan. 14, 2011.

LUKE MACGREGOR/REUTERS

British oil company BP PLC wants to buy a stake in Russian state-controlled peer OAO Rosneft, adding a new dimension to a long-running struggle for control of a big chunk of the country's oil production.

BP chief executive Bob Dudley and chairman Carl-Henric Svanberg put the Rosneft proposal to Russian President Vladimir Putin on Tuesday, Rosneft CEO Igor Sechin said on Friday.

The deal would see Rosneft take BP's stake in TNK-BP – a $60-billion (U.S.) joint venture with Russian oligarchs that BP wants to exit. Last year, TNK-BP blocked a deal that would have seen BP and Rosneft explore for oil in the arctic.

Story continues below advertisement

"We are very pleased by this offer. It allows us to fulfill the tenets of cutting the state's stake (in Rosneft), and we are working firmly toward this," said Mr. Sechin, a close ally of Mr. Putin.

A BP spokesman said: "BP is considering further investment in Russia regardless of who we sell our stake to … we would be interested in investing some of the proceeds in buying shares in Rosneft," adding that any purchase depended on a sale of its TNK-BP stake going through.

BP is seeking to exit its troubled but lucrative investment in TNK-BP, Russia's third-largest oil company, which it formed nearly a decade ago with four tycoons – Len Blavatnik, Mikhail Fridman, German Khan and Viktor Vekselberg – to tap the country's vast energy reserves.

In July, BP entered a 90-day period to talk to potential buyers including the AAR consortium which represents those tycoons.

Mr. Sechin said Rosneft was not in talks with AAR to buy its stake, adding Rosneft has no plans itself to buy shares in BP.

Rosneft's plan to buy BP's TNK-BP stake are progressing and it is talking to banks about raising $15-billion to $20-billion to finance the deal, bankers told Reuters this week.

Kommersant reported on Thursday a deal being discussed would see Rosneft buy 25 per cent of TNK-BP's shares for $10-billion to $15-billion cash with the other 25 per cent paid for with Rosneft shares, leaving BP with a stake of at least 12.5 per cent in Rosneft.

Story continues below advertisement

Mr. Sechin said the deal's structure has not been finalized, a position corroborated by BP sources.

His news conference, held at a business forum in the Black Sea resort of Sochi, coincided with Prime Minister Dmitry Medvedev's keynote address, and stole headlines during one of the premier's annual policy speeches.

Mr. Putin issued a rare rebuke of Mr. Medvedev's government on Tuesday, criticizing its fiscal plans.

Tension has been less well concealed between Mr. Medvedev's government and Mr. Sechin over plans to privatize Rosneft.

The government is aiming to raise $20-billion selling state assets, including stakes in Rosneft and other energy assets.

Mr. Sechin has lobbied for a sale of state energy assets to Rosneftegaz, the holding company which owns much of the state's stake in Rosneft, as a halfway house for state assets to gain value before being floated on the market.

Story continues below advertisement

BP's proposal could be a compromise solution. Instead of buying new or treasury shares, it would buy part of the state's Rosneft holdings, transferring them to a Kremlin-approved strategic investor while achieving the government's formal aims.

Mr. Sechin's main opponent on privatization, Deputy Prime Minister Arkady Dvorkovich, told a newspaper last week he objected to the possible purchase of TNK-BP by Rosneft on the grounds that it increased state control of the oil industry.

Report an error
Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at privacy@globeandmail.com.