Russian partners threaten to sue BP

21st April 2011, Comments 0 comments

BP's woes deepened on Thursday when the local tycoons of its Russian joint venture announced plans to sue the British energy giant over its bid to forge an alliance with state firm Rosneft.

"We are looking into this option very seriously," the Interfax news agency quoted TNK-BP co-owner Viktor Vekselberg as saying.

"We are examining every avenue available to us," Vekselberg said.

Various Russian and Western reports said the eventual suit may seek between $5 and $10 billion in compensation from BP for its planned tie-up with Russia's biggest oil company.

Vekselberg said the venture had "a preliminary estimate" of how much compensation it would seek but refused to provide a firm figure.

"The estimates vary," the PRIME-TASS news agency quoted the Renova Group chief as saying.

BP had been hoping to use the Arctic deal to rescue its fortunes following an oil spill in the Gulf of Mexico last year that dented the company's image and hurt its potential to explore for oil off the US coast.

But the Russian billionaires who own half of TNK-BP argue that they have a right of first refusal on any deal that BP strikes in Russia and that the British side tried to keep the merger secret until the last moment.

Several arbitration panels have sided with the tycoons and BP-Rosneft's $16 billion share-swap and joint Arctic exploration agreement is now up against an extended May 16 deadline for the deal to close.

BP's fortunes had already taken a hit a day earlier when Prime Minister Vladimir Putin -- who personally signed of on the deal in January -- confirmed that he had no plans to intervene on behalf of the embattled British giant.

Vekselberg said the suit may be filed within the next two weeks after it is approved by the company's board.

He added that the court action will be taken both in the British Virgin Islands where TNK-BP is registered as well as in Britain itself.

BP did not respond to the tycoon's announcement. It has already confirmed that it had made a buyout offer to the Russian billionaires in a bid to end the dispute.

But the reported $27 billion offer was rejected and Vekselberg said on Wednesday that the Russian partners "do not want to sell."

Vekselberg also noted that the Russian partners were not in contact with Rosneft over any buyout terms -- a comment suggesting that talks are currently in a stalemate.

Rosneft said last week that it had enough cash on hand and various credit options available to buy out the Russian partners if this ever entered into the company's plans.

"We can manage any large sum for any project of interest to us," Rosneft President Eduard Khudainatov said last week.

But one analyst with the Bank of Moscow told the Vedomosti business daily that the Russian oil company had only $4.1 billion in cash at the end of last year -- a figure dwarfed by BP's estimated $18.5 billion.

Analysts have been surprised by the difficulty BP has had in overcoming a boardroom revolt to a deal that received the blessing of the country's de facto leader and potential future president Putin.

And Rosneft appeared to be preparing for the possibility of a share swap by announcing a $200 million stock buyback plan Tuesday that analysts said showed the company's confidence in a solution.

"We know that this deal it too important for Russia's long-term strategic interest to be allowed to fail," said chief UralSib strategist Chris Weafer.

"What we are almost certainly looking at is a BP-Rosneft deal with a TNK-BP accommodation, either in or outside the formal deal," Weafer said.

© 2011 AFP

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