Rosneft takeover of TNK-BP set to create biggest oil firm

BP to get stake in Russian giant with access to massive oil reserves in Arctic

Rosneft was on course to buy both halves of the TNK-BP Russian joint venture for an estimated $56bn (£35bn) last night after holding audacious overlapping takeover talks with the owners, BP and the AAR consortium.

The Kremlin-controlled hydrocarbon giant was negotiating with both sides of the 50/50 joint venture over two separate deals that would give it complete control of TNK-BP and transform it into the world's biggest oil company.

In its first deal, Rosneft is understood to have agreed to pay $28bn in cash to AAR, a quartet of Russian billionaires led by Viktor Vekselberg, to secure its half of TNK-BP.

For the second deal, Igor Sechin, Rosneft's chief executive and a close associate of President Vladimir Putin, flew into London yesterday afternoon as he sought to finalise the purchase of BP's stake. That transaction, which sources warned last night was still not a done deal, would also be worth about $28bn. However, this time Rosneft would pay with a mixture of cash and shares in Rosneft.

This would provide BP with billions of dollars of cash, which it needs to help pay off compensation claims relating to the 2010 Gulf of Mexico oil spill. It would also give the FTSE 100 company a substantial stake in an enlarged Rosneft and, in turn, access to Russia's vast reserves of oil and gas.

BP, Rosneft and AAR all declined to comment last night.

To complicate matters further, AAR had been involved in parallel negotiations to buy BP's stake in TNK-BP as it considered taking complete control of the joint venture. However, following its deal with Rosneft, it is understood that AAR has decided not to make an offer for BP's stake in the venture.

BP has set a deadline of 9am this morning to receive offers for its stake in TNK-BP and Rosneft was last night set to be the sole bidder. BP could make an announcement about a deal with Rosneft as soon as today.

An exit from the joint venture would come as a welcome relief to BP, which has had a fraught nine-year relationship with AAR. This 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.

Relations between BP and the Soviet-born quartet soured last year when AAR, which also includes 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.

In a further sign of the twists and turns in TNK-BP's colourful history, AAR stands to make considerably less from the deal it has just struck with Rosneft than it could have done in the recent past. The consortium turned down a $32bn offer made jointly by BP and Rosneft last year as BP sought to end its fraught relationship with AAR, while keeping its foot in Russia.

The takeover of TNK-BP by Rosneft 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.

Shares in BP rose by 13p, or 3 per cent, to end the day at 448.35p.

Big freeze: BP in Russia

2003 BP merges its Russian oil assets with three Russian companies, TNK, Sidanko and Onako, to create TNK-BP. BP owns 50 per cent stake, while AAR, a consortium of four Russian oligarchs, Len Blavatnik, Mikhail Fridman, German Khan and Viktor Vekselberg, takes the rest.

2008 Bob Dudley, chief executive of TNK-BP and later ceo of BP, leaves Russia and goes into hiding, citing a campaign of harassment.

January 2011 BP and Rosneft agree $16bn share swap to explore for oil and gas in the Russian Arctic.

May 2011 Rosneft-BP deal collapses after AAR wins an injunction against it.

June 2012 BP puts its stake in TNK-BP up for sale. Under the joint venture agreement, AAR has right of first refusal on the stake

October 2012 AAR agrees to sell stake to Rosneft for $28bn

VIDEO
Arts & Entertainment
Ricky Gervais at a screening of 'Muppets Most Wanted' in London last month
tvRicky Gervais on the return of 'Derek' – and why he still ignores his critics
Sport
Luis Suarez of Liverpool celebrates his goal
sport
Arts & Entertainment
Homer meets Lego Marge in the 25th anniversary episode of The Simpsons, set to air on 4 May
tv
Arts & Entertainment
James Franco and Chris O'Dowd in Of Mice and Men on Broadway
theatreReview: Of Mice and Men, Longacre Theatre
Life & Style
Infant child breast-feeding with eyes closed
healthTo stop mummy having any more babies, according to scientists
News
news
Life & Style
Going down: Google's ambition to build an elevator into space isn't likely to be fulfilled any time soon
techTechnology giant’s scientists say there is no material strong enough for a cable from Earth into orbit
Arts & Entertainment
film
News
David Cameron sings a hymn during the enthronement service of The Most Rev Justin Welby as Archbishop of Canterbury, at Canterbury Cathedral last year
news
Life & Style
From long to Jong: Guy Pewsey gets the North Korean leader's look
fashionThe Independent heads to an Ealing hairdressers to try out the North Korean dictator's trademark do
Extras
indybest10 best smartphones
Arts & Entertainment
tvCreator Vince Gilligan sheds light on alternate endings
Life & Style
Google Doodle celebrates the 63rd anniversary of the Peak District National Park
tech
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Helpdesk Engineer Apprentice

£150.00 per week: QA Apprenticeships: This company has been providing on site ...

Telesales & Sales Support Apprentice

£221.25 per week: QA Apprenticeships: This company is a well established Inter...

Client Relationship Manager - SQL, Python

£40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...

**Financial Services Tax**

£35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...

Day In a Page

Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

Ricky Gervais: 'People are waiting for me to fail'

As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

Mad Men returns for a final fling

The suits are still sharp, but Don Draper has lost his edge
Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

Google finds a lift into space will never get off the ground

Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit
Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics

Is sexual harassment a fact of gay life?

Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics
Moshi Monster creator Michael Acton Smith: The man behind a British success story

Moshi Monster creator Michael Acton Smith

Acton Smith launched a world of virtual creatures who took the real world by storm
Kim Jong-un's haircut: The Independent heads to Ealing to try out the dictator's do

Our journalist tries out Kim Jong-un's haircut

The North Korean embassy in London complained when M&M Hair Academy used Kim Jong-un's image in the window. Curious, Guy Pewsey heads to the hair salon and surrenders to the clippers
A History of the First World War in 100 moments: A forgotten naval victory in which even Nature played a part

A History of the First World War in 100 moments

A forgotten naval victory in which even Nature played a part
Vespa rides on with launch of Primavera: Iconic Italian scooter still revving up millions of sales

Vespa rides on with launch of the Primavera

The Vespa has been a style icon since the 1950s and the release this month of its latest model confirms it has lost little of its lustre
Record Store Day: Independent music shops can offer a tempting alternative to downloads

Record Store Day celebrates independent music shops

This Saturday sees a host of events around the country to champion the sellers of well-grooved wax
Taunton's policy of putting philosophy at heart of its curriculum is one of secrets of its success

Education: Secret of Taunton's success

Taunton School, in Somerset, is one of the country's leading independent schools, says Richard Garner
10 best smartphones

10 best smartphones

With a number of new smartphones on the market, we round up the best around, including some more established models
Mickey Arthur: Aussie tells ECB to stick with Ashley Giles

Mickey Arthur: Aussie tells ECB to stick with Ashley Giles

The former Australia coach on why England must keep to Plan A, about his shock at their collapse Down Under, why he sent players home from India and the agonies of losing his job
Homelessness: Why is the supported lodgings lifeline under threat?

Why is the supported lodgings lifeline under threat?

Zubairi Sentongo swapped poverty in Uganda for homelessness in Britain. But a YMCA scheme connected him with a couple offering warmth and shelter
A History of the First World War in 100 Moments: When the world’s biggest shed took over Regent’s Park

A History of the First World War in 100 Moments

When the world’s biggest shed took over Regent’s Park
The pain of IVF

The pain of IVF

As an Italian woman vows to keep the babies from someone else’s eggs, Julian Baggini ponders how the reality of childbirth is often messier than the natural ideal