BP ready to sell Russian joint venture

1st June 2012, Comments 0 comments

British energy giant BP on Friday said it was ready to offload its stake in troubled Russian joint venture TNK-BP after the shock resignation of the partnership's chief executive earlier this week.

"BP announced today that it has received unsolicited indications of interest regarding the potential acquisition of its shareholding in TNK-BP," it said in a statement, adding that BP intended "to pursue a potential sale".

Monday's resignation of Russian tycoon Mikhail Fridman as TNK-BP head threw one of BP's most profitable overseas operations into turmoil.

Fridman warned on Thursday that the lucrative nine-year alliance was paralysed and needed one of two main partners to take full charge.

BP's 50-percent stake has a market value of about $18 billion (14.5 billion euros) and would help it to meet massive compensation costs resulting from the 2010 Gulf of Mexico oil spill disaster.

Shares in BP jumped 2.82 percent to 406 pence after its announcement on Friday, while London's benchmark FTSE 100 index was down 0.26 percent at 5,307 points in morning deals.

"BP was the stock in focus within the FTSE," said Shavaz Dhalla, a trader at Spreadex.

"However, investors should remain cautious as there are still uncertainties concerning the actual value of BP's stake and whether this sale will in fact be enough to finally cover the Gulf of Mexico spill costs."

Fridman meanwhile added on Thursday that tensions within TNK-BP -- Russia's third-largest oil producer -- had been building since BP's failed bid last year to form an Arctic alliance with the Russian state-owned company Rosneft.

He said that the four Soviet-born billionaires who own half of TNK-BP through a consortium known as Alfa Acess Renova (AAR) have been trying to get disputes settled by the appointment of independent directors to the board.

But Fridman accused BP of dragging its feet on those nominees out of fear that the new board members would side with the Russian tycoons.

BP said in its statement on Friday: "In light of these unsolicited approaches (for TNK-BP) and consistent with its commitment to maximising shareholder value... BP has notified Alfa Access Renova of its intention to pursue a potential sale.

"There can be no guarantee that any transaction will take place."

BP's announcement also comes as a surprise as it had expressed immense interest in saving the venture because it accounts for a quarter of the British group's overall production and billions of dollars in annual dividends.

Fridman owns 25 percent of TNK-BP through his Alfa Group conglomerate and is its second-largest shareholder after BP, whose net profits sank 18 percent in the first quarter on lower oil output triggered by the sale of assets to meet costs of the Gulf of Mexico disaster.

Earnings after tax fell to $5.92 billion in the first three months of 2012 from $7.25 billion in the first quarter of 2011, BP said at the start of May.

The company's fortunes were ravaged two years ago by an explosion on the BP-leased Deepwater Horizon rig that killed 11 workers, sent millions of barrels of oil spewing into the sea and left it with huge compensation costs.

The blast on April 20, 2010, sparked what was been widely acknowledged to be the worst environmental catastrophe in US history.

BP has sold $23 billion of assets as part of its ongoing $37.2-billion divestment programme as it seeks to meet the bill for the disaster.

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© 2012 AFP

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