BP's Russia problems mount with $3 bn claim

19th August 2011, Comments 0 comments

BP's problems in the high-stakes Russian oil market mounted Friday with news that a Siberian court had set a hearing into a $3 billion claim by a local shareholder against the British energy giant.

The long-anticipated announcement came in the wake of this year's failed bid by BP to strike an unprecedented share swap and joint Arctic oil exploration agreement with the Russian state-held giant Rosneft.

The May setback forced BP to reassess its growth strategy and jeopardized the health of TNK-BP -- the lucrative joint venture it created in Russia with a group of local tycoons in 2003.

The venture grew into one of the world's top 10 private oil companies on the back of a Kremlin decision to attract foreign majors into a Russian oil sector that was badly in need of new technology and direct investments.

But the high-profile venture hit turbulence as soon as the Kremlin decided to find a Western partner for an Arctic oil deal that could have potentially given BP access to some of the world's largest untapped reserves.

TNK-BP's four Soviet-born billionaires mounted a perilous but ultimately successful challenge to the Rosneft deal by arguing that they had a right of first refusal to any agreement BP struck in Russia.

The British firm lost its subsequent arbitration case and Rosneft -- which hoped to use the tie-up to become the world's largest oil firm by reserves -- walked away from the deal after refusing to work with its Russian rival.

BP has since officially given up on the Rosneft venture and is now facing the difficult task of resolving boardroom frictions at one of its most profitable foreign partnerships.

Those challenges multiplied when an unheralded minority TNK-BP shareholder named Andrei Prokhorov filed a damages suit earlier this year against BP executives Peter Charow and Richard Scott Sloan.

Prokhorov's attorneys argue that the two former TNK-BP Holding board members had to have known about BP's private negotiations with Rosneft.

The claim adds that their failure to report the talks back to TNK-BP caused the Russian venture 87 billion rubles ($2.97 billion) in losses from unrealised deals.

There has been no formal statement from BP about the Russian suit.

But a source at TNK-BP confirmed Russian press reports stating that a court in the Siberian region of Tyumen had scheduled an initial hearing for September 21.

The Vedomosti business daily said the court has already required the defendants to submit documents explaining their levels of responsibility and obligations to other shareholders.

Prokhorov holds only a tiny stake in TNK-BP and is widely believed to be acting in the interests of the tycoons who control the Russian half of TNK-BP.

The Russian group -- known collectively as AAR -- is also pursuing a simultaneous arbitration case in Stockholm that it hopes will be heard at the end of next month.

AAR hopes the arbitration panel will rule that BP breached the terms of its shareholder agreement -- a decision that could see TNK-BP file a multi-billion-dollar claim against the British firm in London.

Rosneft for its part is not expected to name a new Arctic partner until the end of the year at the earliest and is expected to address the issue at an extraordinary general meeting scheduled for September 13.

The Russian firm has already held formal Arctic talks with the Anglo-Dutch firm Shell and has reported fielding other offers.

© 2011 AFP

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