BP near deal on TNK shareholders

TNK-BP, oil giant BP's $6.8bn (£4bn) Russian joint venture, is considering paying nearly $1bn to buy out disgruntled minority shareholders.

TNK-BP, oil giant BP's $6.8bn (£4bn) Russian joint venture, is considering paying nearly $1bn to buy out disgruntled minority shareholders.

Talks have been held between TNK-BP and minority shareholders in TNK, the Russian oil company that recently merged with BP's interests in the country, and the investors are now optimistic a resolution will be achieved. Previously, they had threatened legal action if an amicable solution was not found.

Ian Hague, the co-founder of New York investment fund Firebird and a minority shareholder, said: "We had a meeting with [TNK-BP] not too long ago in Moscow and it was relatively cordial. They understand what our goals are and we think that we can come to some sort of agreement on what's there for us."

He added that TNK-BP was "looking to buy our interests in TNK" rather than transfer them into the new venture. A price has not been established yet, but Mr Hague said "somewhere between $3 and $5 a share is most probably the range". The shareholders could receive a total of around $925m if a top price of $5 is agreed.

The investors originally bought into TNK and Sidanco, a Russian oil firmpart-owned by BP and now part of TNK-BP. They owned the majority of TNK's free float, believed to be between 3 and 4 per cent of the outstanding shares before the creation of TNK-BP at the end of August. TNK is majority owned by Access Industries, its affiliate Renova and Alpha Bank.

The minority shareholders claim they have not been treated fairly by either TNK or BP under the deal and are concerned they will suffer losses on their investments.

BP declined to comment, although the company has in the past stressed the importance of biding by good corporate governance measures in its dealings in Russia.

BP and TNK's owners hosted a day of presentations earlier this month in London aimed at extolling the virtues of their new Russian venture. Appearing before journalists, analysts and investors, BP's chief executive, Lord Browne, said oil reserve estimates in TNK-BP were 4.1bn barrels, more than 1 million barrels more than earlier predictions. He added that production at the joint venture was expected to rise by 13 per cent this year and another 7 per cent in 2004. BP believes TNK-BP will account for around 15 per cent of its total production.

Lord Browne also confirmed that TNK-BP planned to pay a dividend of around $600m in the first half of 2003.

After the presentation to the City, third-quarter figures from BP showed an immediate impact from the Russian venture, with pro forma net income up 25 per cent at $2.8bn for the quarter. High oil prices have also helped bolster BP's results this year, however.

Russian investments took a battering this week after the arrest of oligarch Mikhail Khodorkovsky, the chairman of Yukos, the country's biggest oil company. He is facing criminal charges of fraud and tax evasion totalling $1bn and his arrest caused the Russian stock market to tumble. A decision by the government to freeze a 44 per cent tranche of Yukos's shares later in the week added to the panic.

Yukos recently agreed to take over billionaire Roman Abramovich's oil company, Sibneft, in an $11bn deal. Mr Abramovich has since gone on to buy Chelsea football club.