Rosneft circled in on TNK-BP yesterday as the state-controlled oil giant tabled a bid of about $28bn (£17bn) for BP's half of the Russian joint venture – just two days after offering the same amount for the other 50 per cent.
Rosneft has offered BP a mixture of cash and shares for its stake in TNK-BP, a joint venture between the FTSE 100 company and AAR, a quartet of Russian billionaires, that has been fraught with tension since it was created nine years ago. The deal would give BP between $15bn and $20bn in cash as well as a stake of between 10 and 20 per cent in the Russian state backed oil giant, sources said.
The bid was lodged first thing yesterday after Igor Sechin, Rosneft's chief executive and a former deputy prime minister of Russia, flew to London on Wednesday for talks with BP. The offer, which BP has yet to publicly acknowledge, is the second part of a co-ordinated attempt by Rosneft to gain full control of TNK-BP.
In the first part, Rosneft has agreed to pay the AAR consortium about $28bn for its stake in TNK-BP, although details have yet to be finalised.
Rosneft is thought to be keen to pay cash for the whole stake, although some analysts have questioned whether it would be able to raise enough money to buy both halves of TNK-BP. As a result, Rosneft is also understood to be discussing the possibility of funding part of that deal by giving the four billionaires small stakes in itself. They are also thought to be discussing the possibility of deferring part of the cash payment to AAR.
If the deal Rosneft has proposed with BP is finalised, the oil giant would receive much-needed cash to help finance the tens of billions of dollars of compensation it owes as a result of the Gulf of Mexico oil spill. Meanwhile, the shares BP would receive in Rosneft would give it a stake in Russia's vast and growing hydrocarbon reserves.
However, while BP is thought to still prefer a sale of its stake in TNK-BP, analysts said it was still possible the company may decide to hold on to it. Assuming the deal Rosneft has tentatively struck with AAR goes through, the link between BP and the consortium would be severed – removing the main reason for BP deciding to sell in the first place.
Although BP needs cash, it may decide that being in a 50/50 joint venture with Rosneft – through a restructured TNK-BP – would be the best, long-term strategy, analysts said.
Dominique Patry, an analyst at Crédit Agricole's Cheuvrex research arm, said: "Either BP ends up selling its stake to Rosneft for a similar value to the rumoured $28bn offered to AAR, or BP keeps its 50 per cent stake in TNK-BP but with Rosneft as a partner."
Severing ties with AAR would come as a welcome relief to BP. Their relationship has included court cases and harassment claims by Bob Dudley, then the head of TNK-BP and now BP's chief executive, which forced his exit from Russia in 2008.
Tensions between BP and the Soviet-born quartet came to a head last year when AAR – which includes Viktor Vekselberg, Mikhail Fridman, German Khan and Len Blavatnik – blocked a proposed deal between BP and Rosneft to explore the Russian Arctic. The consortium argued that it violated the terms of the joint venture, which gave it first option on any dealings BP had in Russia.
Relations deteriorated further in May when Mr Fridman quit as TNK-BP's chief executive "for personal reasons". BP put its stake up for sale the following month, in a move that presented AAR with the unpalatable prospect of going into business with Rosneft, a company with the force and backing of the Kremlin.
Rosneft's keeness to buy up TNK-BP continues the Russian state's quest to take back control of its vast oil and gas production to ensure it gets a greater share of the profits.
BP, AAR and Rosneft declined to comment.
Shares in BP rose by 3.7p to close at 452.05p, having jumped by 3 per cent on Wednesday as news of Rosneft's impending bid leaked into the market.