Abramovitch link in BP's Russian gamble

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The Independent Online

BP IS to become business partners with Roman Abramovich, the Russian tycoon who has bought Chelsea football club, as part of the tie-up between the UK oil giant and Russia's TNK.

BP said it was spending $1.35bn (£856m) to enlarge its previously announced deal with TNK to include a 50 per cent stake in Slavneft. Slavneft is a joint venture between TNK and Sibneft, the energy group which is majority-owned by Mr Abramovich.

A spokesperson for BP said the deal was about "reserves and production not personalities". Mr Abramovich or another Sibneft representative is unlikely to sit on the board of TNK-BP, the result of the blockbuster merger which has had a clear a raft of regulatory hurdles in Russia.

BP said in a statement it was not including in the deal its interests in Sakhalin, an island off the Siberian coast near Japan, "for the moment".

The exclusion of these oil and gas development assets has bumped up the price BP is paying slightly by $200m.

That decision and the addition of the stake in Slavneft means BP will now pay TNK's controlling shareholders Alfa Group and Access-Renova (AAR) $7.7bn.

BP's partner in Sakhalin, State-owned Rosneft, has said it wants to work exclusively with BP and not with the enlarged TNK-BP business.

Lord Browne, chief executive of BP, said: "The addition of the Slavneft interest into TNK-BP represents a very important step in the building of the future of the company".

TNK-BP will be Russia's third-largest oil and gas company, employing about 113,000 people and producing about 1.2 million barrels a day from its main fields in West Siberia and the Volga Urals. It will be based in the British Virgin Islands.

The venture owns five oil refineries and more than 2,100 filling stations in Russia and Ukraine. It holds proven resources equal to 5.2 billion barrels of oil, of which BP expects to pump 3.2 billion before the renewal of leases.

BP's groundbreaking move with TNK, which was announced in February this year, completed yesterday after Tuesday's clearance from Russia's competition regulator.

BP will control 50 per cent of TNK-BP. Shareholders of Alfa Bank, one of Russia's biggest banks, led by Mikhail Fridman, and shareholders of Access/Renova, the industrial group led by Viktor Vekselberg, will control the other 50 per cent of the TNK-BP venture.

The deal helps BP boost its reserves and its production but most importantly, say analysts, it gives the company a seat at the table in Russia. BP's shares closed down 8p at 429p.