BP's
Russia 'exit' as clear as
crude By Robert M Cutler
MONTREAL - New skepticism over an
announced share sale fueled a rise in stock of the
energy company TNK-BP on Russian equity markets
Monday after a four-day decline last week. The
British energy major BP had said that it would
will seek to sell its half of its Russian joint
venture TNK-BP to an unspecified buyer who had
submitted an unsolicited bid for its stake in the
joint venture (estimated at a minimum US$15
billion with other guesses ranging up to $20-25
billion), even though its Russian partners
threatened to block such a deal. TNK-BP is
Russia's third-biggest oil producer.
On
Monday, a high Gazprom official told the press
that his firm has no interest in buying BP's stake
in TNK-BP. Speculation had centered on the state
trust Rosneftegaz as likely to be the prime
candidate if there really is one.
Rosneftegaz holds over three-quarters of
Rosneft, the country's
biggest oil company,
with which BP tried to close a deal last year
before TNK-BP's other partners - three Russian
oligarchs together in the Alfa Access Renova (AAR)
group - obtained an injunction from the High Court
in London that blocked the BP-Rosneft agreement on
grounds of lack of transparency and ordered
arbitration. The AAR group had maintained that BP
was not transparent with them and that their
contract gave them the right to a veto.
Last year's deal between BP and Rosneft
that AAR challenged in London involved a
reciprocal share swap between the two companies
together with an agreement jointly to explore and
develop prized Siberian offshore licenses in the
Arctic region. It collapsed in the wake of the
court case, and last August the deal for those
blocks in the Kara Sea went to the US-based
ExxonMobil.
The agreement covers the
Vostochno-Prinovozemelskoe field, between the
Novaya Zemlya archipelago (where the USSR once
carried out atomic testing) and the Yamal
Peninsula (site of still other energy
exploration), in the South Kara Sea.
Established in 2003, the TNK-BP joint
venture originally cost US$7 billion. The current
announcement comes following the cancellation of a
board meeting resulting from last year's
resignation of two independent directors including
former German chancellor Gerhard Schroeder. Their
departure deprived the board of a quorum and they
have not yet been replaced.
Also last week
TNK-BP's chief executive, Mikhail Fridman,
resigned as a result of a breakdown in corporate
governance at the joint venture, according to an
Agence France-Presse report. As a result of the
board meeting's cancellation, the company was
unable to declare first-quarter dividends for its
shareholders. In this context, BP issued the
public statement that it was considering
unsolicited offers for its stake in TNK-BP due to
the need "to maximize shareholder value".
A sale to the Russian state would increase
state-sector domination of the country's oil
production to over 50%. Such a development would
be in line with President Vladimir Putin's clear
preference for state-centered development and
marketing of the country's energy resources both
at home and abroad. A little over a year ago it
had seemed that neither Putin (then prime
minister) nor the group of then president Dmitry
Medvedev within the elite was inclined to step in
on behalf of BP in its travails with TNK-BP.
Indeed, at the time Arkady Dvorkovich, one of
Medvedev's assistants, noted publicly that
investment confidence in Russia was so poor that
resolving the BP issue would not improve the
general situation. In April 2011, Medvedev, as
part of his triple-headed policy initiative
against corruption, in favor of investment and for
administrative streamlining, ordered government
cabinet ministers holding company positions to
leave their posts.
Deputy prime minister
Igor Sechin then accordingly resigned his position
as chairman of Rosneft's board of directors, which
he had held since 2004, the year he also became
deputy head of the Russian president's executive
office before moving on to become deputy prime
minister. Since Putin became president again this
year in May, Sechin has not formally rejoined the
government or presidential administration; rather
he has formally rejoined Rosneft as the company's
president and chairman of its management board.
Nevertheless, it is instructive that,
following a weekend to reflect on last week's
brouhaha, business analysts in the Moscow
investment community had begun to come around to
thinking that the sale would make little sense
from the standpoint of BP corporate strategy.
A research note from VTB Capital, for
example, called the "recent spike in media
attention ... part of both sides' [ie BP and AAR]
strategy ... to draw in the interest of potential
buyers," as quoted by Bloomberg News.
Interestingly, the existence of such a
media strategy is not fully in contradiction with
the prospect that Rosneftegaz puts in a bid for
part of TNK-BP. Nor is such a bid in contradiction
with the prospect that the principals are seeking
other suitors. All this just goes to show the
dangers of taking press releases and even
non-anonymous media leaks at face value,
especially on such as a high-stakes and occulted
playing field as the Eurasian hydrocarbon energy
complex.
Dr Robert M Cutler
(http://www.robertcutler.org),
educated at the Massachusetts Institute of
Technology and The University of Michigan, has
researched and taught at universities in the
United States, Canada, France, Switzerland, and
Russia. Now senior research fellow in the
Institute of European, Russian and Eurasian
Studies, Carleton University, Canada, he also
consults privately in a variety of fields.
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