Arab Today, arab today bp rosneft agree mega shakeup of russia energy landscape
Last Updated : GMT 18:30:25
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Arab Today, arab today

BP, Rosneft agree mega shake-up of Russia energy landscape

Arab Today, arab today

Arab Today, arab today BP, Rosneft agree mega shake-up of Russia energy landscape

London - AFP

Rosneft gobbled up BP\'s highly-profitable Russian joint venture, transforming itself into a top player in the global oil sector in a $61 billion (47 billion euro) deal on Monday that gives the BP nearly a fifth of the Russian energy giant and ensures access to key Arctic resources. British BP said in a statement that it has agreed to sell its half of Russian venture TNK-BP to Rosneft for $17.1 billion and another 12.84 percent share in the state firm. BP added it would spend $4.8 billion of the proceeds to buy another 5.66 percent of Rosneft from the Russian government, bringing its total stake in the Russian company to 19.75 percent. BP currently owns 1.25 percent of Rosneft. The shake-up has major implications for the exploration of oil and gas in the vast Arctic region, while helping to firm up BP\'s plans to refocus its attention away from the United States after the 2010 oil spill disaster. It also effectively ends the often tumultuous but highly profitable TNK-BP joint venture. In Moscow, Rosneft announced it had also bought the other 50-percent in TNK-BP from key Russian investors for $28 billion. Rosneft chief executive Igor Sechin estimated the total value of the deal at $61 billion. Russian President Vladimir Putin hailed the transaction. \"This is a good, large deal that is necessary not only for the Russian energy sector but also the entire economy,\" news agencies quoted Putin as saying. \"This is a very good signal to the Russian and international energy markets.\" BP will pay the Russian government $8 per Rosneft share, representing a premium of 12 percent to the closing price last Thursday. Under the terms of the agreement, BP would also have two seats on Rosneft\'s nine-person board. Subject to regulatory approvals, the transactions are expected to complete during the first half of 2013. \"BP today announced that it has signed heads of terms to sell its 50 percent share in TNK-BP to Rosneft,\" the statement said. \"Signing of the definitive agreements is conditional on the Russian government agreeing to the sale of the 5.66 percent stake in Rosneft and it is intended that the TNK-BP sale and this further investment in Rosneft would complete on the same day. \"Therefore, on completion of the proposed transaction, BP would acquire a total 18.5 percent stake in Rosneft and net $12.3 billion in cash. \"This would result in BP holding 19.75 percent of Rosneft stock, when aggregated with BP\'s 1.25 percent current holding in Rosneft.\" BP chief executive Bob Dudley said the deal \"builds on BP\'s track record of value creation in Russia. It is consistent with our strategy of deepening our positions in the world\'s most prolific oil and gas regions. \"BP intends to be a long term investor in Rosneft -- an investment which I believe will deliver value for our shareholders over the next decade and beyond.\" The deal will catapult Rosneft into becoming the world\'s biggest publicly-traded oil company and second in size only to Saudi Arabia\'s Aramco. The deal will give Rosneft a daily output of 3.15 million barrels -- far higher than current leader ExxonMobil, which pumps out 2.3 million barrels a day. The deal should relieve tensions at one of Russia\'s most profitable oil companies -- a venture BP launched in 2003 to expand its presence in a country with the world\'s biggest oil and natural gas output. TNK-BP has generated tens of billions of dollars and was responsible for more than a quarter of BP\'s crude output last year. However, tensions reached breaking point over BP\'s efforts early in 2011 to strike a separate Arctic oil tie-up with Rosneft. That Arctic deal was blocked by the BP\'s Russian partners in TNK-BP in a shock move which only worsened their relations with both Rosneft and BP still further.

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