Rosneft throws its hat into the TNK-BP ring

Russia's state-owned oil company Rosneft is to enter negotiations with BP to buy the integrated oil giant's shareholding in TNK-BP, Russia's third largest oil producer.

BP is already in discussions with Alfa Access-Renova (AAR), its partner in the TNK-BP joint venture, regarding AAR taking full control of the venture, but now Rosneft has thrown its hat into the ring.

BP's negotiations with Alfa Access-Renova, a consortium of Russian billionaires, kicked off on July 19th, and although, as evidenced by this latest announcement, BP will continue to entertain indications of interest from other parties, it said it will "negotiate in good faith with Alfa Access-Renova in accordance with its legal obligations."

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The joint venture was formed in 2003 as the result of the merger of BP's Russian oil and gas assets and the oil and gas assets of Alfa Access-Renova. Though it has been a profitable investment for BP it has also generated more than its fair share of board room friction, especially when BP announced plans (subsequently abandoned) to form a joint venture with Rosneft without inviting AAR to participate.

TNK-BP has projects on the go in Russia and Ukraine, and international interests in Brazil, Venezuela and Vietnam. Analysts have estimated that BP's stake in TNK-BP could be worth anywhere between $25bn and $30bn, though a sale to Rosneft could end up with BP sitting on a large stake in Rosneft rather than receiving a pile of cash, which would, at least, leave it with continued exposure to the lucrative Russian and Ukrainian oil producing areas.

For its part, Rosneft said "the potential acquisition would complement its existing portfolio and create value for all stakeholders."

Igor Sechin, President of Rosneft, said in a prepared statement: "Rosneft believes there are considerable synergies to be gained in eastern Siberian upstream, gas development, crude and product logistics optimisation and other areas."

Given BP's chequered history in its partnership with its Russian joint venture partners, Rosneft might be better placed than BP to exploit TNK-BP's assets.

JH