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BP and Rosneft: The Sale of TNK-BP Product Image

BP and Rosneft: The Sale of TNK-BP

  • Published: November 2012
  • Region: Russia, Ukraine
  • 21 Pages
  • MarketLine

Introduction

BP has been actively involved in the Russian energy market via its joint venture TNK-BP since 2003. The company sold its 50% stake to Rosneft in exchange for $17.1bn and 12.84% equity in the buyer. Additionally, BP plans to use the cash to buy a further 5.7% in Rosneft, bringing BP’s stake to 19.75%. Rosneft has also bid for the Alfa-Access-Renova consortium’s stake in TNK-BP, offering $28bn.

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Highlights

TNK-BP was created in 2003, when BP and AAR merged their oil assets in Russia and Ukraine, with a 50% share each. The initial investment cost BP approximately $8bn. Since then, TNK-BP has paid out $19bn in dividends, worth approximately $2bn a year to BP. Furthermore, TNK provided 27% of BP's reserves and 29% of BP’s production in 2011.

The Russian oil and gas market accounted for 25.6% of the European market’s READ MORE >

OVERVIEW

- Catalyst

- Summary

WHY BP IS LOOKING TO SELL TNK

- TNK has served BP well
-- The venture has provided abundant returns
-- TNK provided access to one of the largest energy markets
-- TNK helped BP to divest following the Gulf of Mexico oil spill

- AAR and BP had different visions for TNK

- BP and AAR clashed repeatedly
-- BP tried to replace AAR with Gazprom
-- Disagreements over corporate structure
-- AAR blocked an Arctic exploration venture with Rosneft

WHAT BP AND ROSNEFT GAIN FROM THE MERGER

- Clear exit from AAR partnership and disruption to business
-- Clear exit from AAR
-- The deal solves one major business disruption

- BP gains a stake in Rosneft
-- BP will benefit from Rosneft’s premier position in Russia
-- Rosneft gains from BP’s experience
-- Rosneft should be a more accommodating partner

- Rosneft gains synergies from merging TNK assets

THE RISKS OF THE MERGER

- Russian state intervention
-- Resource nationalism is not practical
-- Yukos
-- Shell in Sakhalin
-- Foreign ventures remain

- BP as a minority stakeholder of Rosneft
-- The loss of TNK profits
-- Rosneft heavily leveraged to fund the acquisition

CONCLUSIONS

- BP moves to settle uncertainty in a key market

APPENDIX

- Definitions

- Sources

- Further reading

- Ask the analyst

- About MarketLine

- Disclaimer

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