TNK-BP threatens BP's $10bn Rosneft venture

Sarah Arnott
Friday 28 January 2011 01:00 GMT

BP's $10bn (£6.3bn) Arctic exploration deal with Russia's Rosneft faces a legal challenge from the billionaires behind the oil giant's Russian joint venture, TNK-BP.

The four oligarchs who make up the Alfa-Access-Renova (AAR) consortium that owns 50 per cent of TNK-BP filed a suit in London's High Court yesterday claiming the Kremlin-backed Rosneft deal announced two weeks ago rides roughshod over a shareholder agreement between BP and TNK-BP because the Russian joint venture was not given the opportunity to participate.

If the injunction is upheld at the hearing next Tuesday – coincidentally on the same day that BP publishes its annual results – then all negotiations between BP and Rosneft over the $5bn share-swap and South Kara exploration programme must cease until the dispute has been resolved.

TNK-BP's Russian backers – Victor Vekselberg, Mikhail Fridman, Leonard Blavatnik and German Khan – are angry and surprised that the company was not given details of the deal. At a board meeting in December, attended by BP's chief executive Bob Dudley, discussion of the talks with Rosneft are understood to have given no hint of an imminent deal. And another meeting between Mr Fridman and Mr Dudley, just one day before the Arctic deal was announced, was similarly unspecific.

TNK-BP may not be trying to stop the venture going ahead, but rather to get a piece of the action itself. But the very public challenge to a proposal backed by both Vladimir Putin, the Russian Prime Minister, and his deputy Igor Sechin, who is also Rosneft's chairman, raised eyebrows yesterday.

David Hart, an analyst at Westhouse Securities, said: "Even if TNK-BP has a strong case, it is a dangerous game to take on Russia's political elite."

Mr Sechin was non-committal on the fracas yesterday, saying only that he was sure the disagreements could be ironed out. The Rosneft chairman was speaking at the World Economic Forum in Davos, where he had just announced a second major tie-up, with ExxonMobil, to explore the Black Sea.

Sources close to BP suggest that the company was anticipating a response from its Russian partner to the Rosneft deal. But the company is adamant it has not broken the terms of the joint venture. "We have complied with the shareholder agreement," a spokesman for BP said. "We've notified our partners of our intention to do the deal, we continue to talk to them, and we expect to reach a resolution in due course."

Behind closed doors, views are more colourful. BP insiders point out that TNK-BP has none of the offshore expertise needed for the demanding projects in the Arctic. The political arguments are even stronger. "You don't end up with a deal with two of the most powerful people in the country if it hasn't been thought through," said one source at the company.

The latest row has shattered the calm that has held between BP and AAR since the high-profile struggle for power that saw Mr Dudley, then the chief executive of the joint venture, forced into hiding in 2008.

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